{"id":2237,"date":"2020-02-11T02:28:55","date_gmt":"2020-02-11T02:28:55","guid":{"rendered":"https:\/\/course.oeru.org\/bman111\/?page_id=2237"},"modified":"2020-02-11T02:28:55","modified_gmt":"2020-02-11T02:28:55","slug":"income-statement","status":"publish","type":"page","link":"https:\/\/course.oeru.org\/bman111\/learning-pathways\/understanding-financial-statements\/income-statement\/","title":{"rendered":"Income statement"},"content":{"rendered":"<div id=\"content\" class=\"mw-body container\" role=\"main\">\n<div class=\"row\">\n<div class=\"col-md-12\">\n<div class=\"panel\">\n<div class=\"panel-body\">\n<div id=\"bodyContent\">\n<div id=\"mw-content-text\" lang=\"en\" dir=\"ltr\" class=\"mw-content-ltr\">\n<div class=\"floatright\"><a href=\"https:\/\/wikieducator.org\/File:Calculator-Calculation.jpg\" class=\"image\"><img loading=\"lazy\" decoding=\"async\" alt=\"Calculator-Calculation.jpg\" src=\"\/\/wikieducator.org\/images\/thumb\/d\/df\/Calculator-Calculation.jpg\/300px-Calculator-Calculation.jpg\" width=\"300\" height=\"200\" class=\"img-responsive\"><\/a><\/div>\n<p>The <b>Income Statement<\/b> (also called the <b>profit and loss statement<\/b> or <b>profit and loss account<\/b>) focuses on a company&#8217;s revenue and expenses for a particular period of time (e.g. monthly, quarterly, or annually).\n<\/p>\n<p>An income statement is based on the following equation (Profit = Income &#8211; Expenses)<sup id=\"cite_ref-1\" class=\"reference\"><a href=\"#cite_note-1\">[1]<\/a><\/sup>.\n<\/p>\n<p><br style=\"clear:both;\">\n<\/p>\n<div id=\"Reading\" class=\"panel iDevice\">\n\t<div class=\"panel-heading idevice-heading\">\n\t\t<div>\n\t\t\t<img decoding=\"async\" class=\"pedagogicalicon\" alt=\"reading\" src=\"https:\/\/course.oeru.org\/bman111\/wp-content\/themes\/oeru_course\/idevices\/Icon_reading.png\">\n\t\t<\/div>\n\t\t<div>\n\t\t\t<h2>Required reading<\/h2>\n\t\t<\/div>\n\t<\/div>\n\t<div class=\"panel-body\">\n\t\t<div class=\"col-md-12\">\n\t\t\t<\/p>\n<p>Read the following texts:\n<\/p>\n<ul>\n<li> <a rel=\"nofollow\" class=\"external text\" href=\"http:\/\/www.toryburchfoundation.org\/resources\/finance\/introduction-to-the-income-statement\/\">Introduction to the Income Statement<\/a>\n<\/li>\n<li> <a rel=\"nofollow\" class=\"external text\" href=\"https:\/\/www.entrepreneur.com\/encyclopedia\/income-statement\">Income Statement<\/a>\n<\/li>\n<\/ul>\n<p>\n<\/p>\n<p>\n\t\t<\/div>\n\t<\/div>\n<\/div>\n<p>\n<\/p>\n<div class=\"panel iDevice WEquizMultipleChoice\">\n\t<div class=\"panel-heading idevice-heading\">\n\t\t<div>\n\t\t\t<img decoding=\"async\" class=\"pedagogicalicon\" alt=\"assessment\" src=\"https:\/\/course.oeru.org\/bman111\/wp-content\/themes\/oeru_course\/idevices\/Icon_qmark.png\">\n\t\t<\/div>\n\t\t<div>\n\t\t\t<h2>Quiz<\/h2>\n\t\t<\/div>\n\t<\/div>\n\t<div class=\"panel-body\">\n\t\t<div class=\"col-md-12\">\n\t\t\t\n<p>Try the following questions to check what you have understood.\n<\/p>\n<ul>\n<li> A company has annual Sales of $328,000 with Cost of Goods Sold $142,000. What is the company&#8217;s Gross Profit?\n<ul>\n<li> $470,000\n<ul>\n<li> <b>Try again<\/b>. Don&#8217;t forget, (Annual sales) &#8211; (Cost of Goods) = (Gross Profit).\n<\/li>\n<\/ul>\n<\/li>\n<li> $186,000\n<ul>\n<li> <b>Yes, that&#8217;s right<\/b>. (Annual sales) &#8211; (Cost of Goods) = (Gross Profit).\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li> The same company (over the same period of time) spends $76,000 on Salaries and $11,000 on Utilities. What is their income before tax?\n<ul>\n<li> $99,000\n<ul>\n<li> <b>That&#8217;s correct<\/b>.(Gross Profit) &#8211; (Salaries) &#8211; (Utilities) = (Income before tax).\n<\/li>\n<\/ul>\n<\/li>\n<li> $87,000\n<ul>\n<li> <b>Try again<\/b>. (Gross Profit) &#8211; (Salaries) &#8211; (Utilities) = (Income before tax).\n<\/li>\n<\/ul>\n<\/li>\n<li> $65,000\n<ul>\n<li> <b>Try again<\/b>. (Gross Profit) &#8211; (Salaries) &#8211; (Utilities) = (Income before tax).\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li> If income tax is 20%, what is the same company&#8217;s net income?\n<ul>\n<li> $79,200\n<ul>\n<li> <b>Well done!<\/b> (Income before tax) &#8211; (Income before tax x 20%) = Net Income.\n<\/li>\n<\/ul>\n<\/li>\n<li> $72,900\n<ul>\n<li> <b>Try again<\/b> (Income before tax) &#8211; (Income before tax x 20%) = Net Income.\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li> Your company has annual Sales of $447,000 and Cost of Goods Sold is $199,000. What is your Gross Profit?\n<ul>\n<li> $646,000\n<ul>\n<li> <b>Try again<\/b>.  Remember, (Annual sales) &#8211; (Cost of Goods) = (Gross Profit).\n<\/li>\n<\/ul>\n<\/li>\n<li> $248,000\n<ul>\n<li> <b>Yes, that&#8217;s correct<\/b>. (Annual sales) &#8211; (Cost of Goods) = (Gross Profit).\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li> For the same company (over the same period of time), Salaries are $104,000 and Utilities cost $18,000. What is your Income before tax?\n<ul>\n<li> $122,000\n<ul>\n<li> <b>Try again<\/b>. (Gross Profit) &#8211; (Salaries) &#8211; (Utilities) = (Income before tax).\n<\/li>\n<\/ul>\n<\/li>\n<li> $126,000\n<ul>\n<li> <b>That&#8217;s right<\/b>. (Gross Profit) &#8211; (Salaries) &#8211; (Utilities) = (Income before tax).\n<\/li>\n<\/ul>\n<\/li>\n<li> $370,000\n<ul>\n<li> <b>Try again<\/b>. (Gross Profit) &#8211; (Salaries) &#8211; (Utilities) = (Income before tax).\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li> Now, if income tax is 20%, what is your Net Income\n<ul>\n<li> $25,200\n<ul>\n<li> <b>Incorrect<\/b>. This is how much Income Tax you have to pay i.e. (Income before tax x 20%).\n<\/li>\n<\/ul>\n<\/li>\n<li> $100,800\n<ul>\n<li> <b>Well done!<\/b>. (Income before tax) &#8211; (Income before tax x 20%) = Net Income.\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>\n<\/p>\n<p>\n\t\t<\/div>\n\t<\/div>\n<\/div><\/p>\n<p>\n<\/p>\n<div class=\"panel iDevice WEquizMultipleChoice\">\n\t<div class=\"panel-heading idevice-heading\">\n\t\t<div>\n\t\t\t<img decoding=\"async\" class=\"pedagogicalicon\" alt=\"assessment\" src=\"https:\/\/course.oeru.org\/bman111\/wp-content\/themes\/oeru_course\/idevices\/Icon_qmark.png\">\n\t\t<\/div>\n\t\t<div>\n\t\t\t<h2>Income statement activity<\/h2>\n\t\t<\/div>\n\t<\/div>\n\t<div class=\"panel-body\">\n\t\t<div class=\"col-md-12\">\n\t\t\t\n<ul>\n<li>Draw up an income statement based on the following figures to determine net profit:<br \/>\n<table class=\"oeru1 table table-striped\">\n<tbody>\n<tr>\n<td>Sales<\/td>\n<td style=\"text-align: right;\">629,000<\/td>\n<\/tr>\n<tr>\n<td>Cost of goods sold<\/td>\n<td style=\"text-align: right;\">293,000<\/td>\n<\/tr>\n<tr>\n<td>Salary expense<\/td>\n<td style=\"text-align: right;\">127,000<\/td>\n<\/tr>\n<tr>\n<td>Utilities expense<\/td>\n<td style=\"text-align: right;\">24,000<\/td>\n<\/tr>\n<tr>\n<td>Income tax<\/td>\n<td style=\"text-align: right;\">20%<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>You can use this template to help you:<\/p>\n<table class=\"oeru1 table table-striped\">\n<tbody>\n<tr>\n<th>Item<\/th>\n<th>Income<\/th>\n<th>Expenditure<\/th>\n<\/tr>\n<tr>\n<td>Sales<\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Less Cost of Goods Sold<\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td><b>Gross Profit<\/b><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Less Salary expense<\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Less Utilities expense<\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td><b>Income before tax<\/b><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Less Income Tax Expense<\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td><b>Net Profit<\/b><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><\/p>\n<ul>\n<li>Click here to reveal the answer.\n<ul>\n<li>\n<table class=\"oeru1 table table-striped\">\n<tbody>\n<tr>\n<th>Item<\/th>\n<th>Income<\/th>\n<th>Expenditure<\/th>\n<\/tr>\n<tr>\n<td>Sales<\/td>\n<td style=\"text-align: right;\">629,000<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Less Cost of Goods Sold<\/td>\n<td><\/td>\n<td style=\"text-align: right;\">293,000<\/td>\n<\/tr>\n<tr>\n<td><b>Gross Profit<\/b><\/td>\n<td style=\"text-align: right;\"><b>336,000<\/b><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Less Salary expense<\/td>\n<td><\/td>\n<td style=\"text-align: right;\">127,000<\/td>\n<\/tr>\n<tr>\n<td>Less Utilities expense<\/td>\n<td><\/td>\n<td style=\"text-align: right;\">24,000<\/td>\n<\/tr>\n<tr>\n<td><b>Income before tax<\/b><\/td>\n<td style=\"text-align: right;\"><b>185,000<\/b><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Less Income Tax Expense<\/td>\n<td><\/td>\n<td style=\"text-align: right;\">37,000<\/td>\n<\/tr>\n<tr>\n<td><b>Net Profit<\/b><\/td>\n<td style=\"text-align: right;\"><b>148,000<\/b><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>\n<\/p>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>\n\t\t<\/div>\n\t<\/div>\n<\/div><\/p>\n<p>\n<\/p>\n<ol class=\"references\">\n<li id=\"cite_note-1\"><span class=\"mw-cite-backlink\"><a href=\"#cite_ref-1\">\u2191<\/a><\/span> <span class=\"reference-text\"><a rel=\"nofollow\" class=\"external text\" href=\"http:\/\/www.businessdictionary.com\/definition\/income-statement.html\">BusinessDictionary<\/a><\/span>\n<\/li>\n<\/ol>\n<p><!-- \nNewPP limit report\nCPU time usage: 0.056 seconds\nReal time usage: 0.063 seconds\nPreprocessor visited node count: 391\/1000000\nPreprocessor generated node count: 1356\/1000000\nPost\u2010expand include size: 23621\/2097152 bytes\nTemplate argument size: 17647\/2097152 bytes\nHighest expansion depth: 8\/40\nExpensive parser function count: 0\/100\n--><\/p>\n<p><!-- Saved in parser cache with key we_en-mw_:pcache:idhash:186645-0!*!*!*!*!2!* and timestamp 20200211022853 and revision id 1073287\n -->\n<\/div>\n<div class=\"visualClear\"><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"row\">\n<div class=\"col-md-12\">\n<ul class=\"pager\">\n<li class=\"previous\">\n            <a href=\"\/bman111\/learning-pathways\/understanding-financial-statements\/basic-definitions\">\u2190 Previous<\/a>\n          <\/li>\n<li class=\"next\">\n            <a href=\"\/bman111\/learning-pathways\/understanding-financial-statements\/balance-sheet\">Next \u2192<\/a>\n          <\/li>\n<\/ul><\/div>\n<\/p><\/div>\n<\/div>\n<footer>\n<br \/>\n<\/footer>\n","protected":false},"excerpt":{"rendered":"<p>The Income Statement (also called the profit and loss statement or profit and loss account) focuses on a company&#8217;s revenue and expenses for a particular period of time (e.g. monthly, quarterly, or annually). An income statement is based on the following equation (Profit = Income &#8211; Expenses)[1]. \u2191 BusinessDictionary \u2190 Previous Next \u2192<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":2229,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"footnotes":""},"class_list":["post-2237","page","type-page","status-publish","hentry"],"_links":{"self":[{"href":"https:\/\/course.oeru.org\/bman111\/wp-json\/wp\/v2\/pages\/2237","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/course.oeru.org\/bman111\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/course.oeru.org\/bman111\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/course.oeru.org\/bman111\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/course.oeru.org\/bman111\/wp-json\/wp\/v2\/comments?post=2237"}],"version-history":[{"count":1,"href":"https:\/\/course.oeru.org\/bman111\/wp-json\/wp\/v2\/pages\/2237\/revisions"}],"predecessor-version":[{"id":2238,"href":"https:\/\/course.oeru.org\/bman111\/wp-json\/wp\/v2\/pages\/2237\/revisions\/2238"}],"up":[{"embeddable":true,"href":"https:\/\/course.oeru.org\/bman111\/wp-json\/wp\/v2\/pages\/2229"}],"wp:attachment":[{"href":"https:\/\/course.oeru.org\/bman111\/wp-json\/wp\/v2\/media?parent=2237"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}