While the balance sheet
constitutes a financial "snapshot" at
a given point in time (such as December 31), the
income statement summarizes a financial "movie"
of operational results over a period of time (such
as for the year ending December 31). It shows
performance -- the company's revenues minus expenses
equal net income.
ALBEGA
CORPORATION
Income Statement
Year ended December 31, 20xx |
| Net sales |
|
$500,000 |
| Cost of goods sold |
|
$304,000 |
| Gross margin |
|
$196,000 |
| Other expenses |
|
$115,000 |
Depreciation |
$ 15,000 |
|
Selling and administrative
expenses |
$100,000 |
|
| Operating income |
|
$81,000 |
| Other income |
|
$ 0 |
| Total income |
|
$81,000 |
| Dividends and interest |
|
$13,000 |
Interest on long-term notes
|
$ 13,000 |
|
| Income before income taxes |
|
$68,000 |
| Income taxes |
|
$18,000 |
| Net profit |
|
$50,000 |
| Extraordinary items |
|
$12,000 |
| Net income |
|
$38,000 |
Net income per share
(1,000 shares outstanding) |
|
$ 38.00 |
The income statement gives a detailed
account of --
|
Revenues |
- |
Expenses |
= |
Income |
Notice that there are six "income"
subtotals
- Gross margin = sales - cost
of goods
- Operating income/profit =
gross margin - expenses not allocated to goods
sold
- Total income = operating
+ other income
- IBIT (income before income taxes)
= total income - dividends, interest
- Net profit = total income
after dividends, interest, taxes
- Net income = net profit -
extraordinary items
|
Items
What do the various items in an income statement
mean?
- Net sales
- Cost of goods
- Depreciation
- Selling and administrative expenses
- Interest
- Income taxes
- Extraordinary items
(More>>) |
3.3 Income Statement