The Income StatementThe Income Statement

The Income Statement The Income Statement

RevenuesRevenues Money or promise of Money or promise of

money received from money received from the sale of goods and the sale of goods and servicesservices

Examples: Examples: Ticket Sales Ticket Sales

Repair Revenue Repair Revenue

Legal Services/Fees Legal Services/Fees

Shoe Sales Shoe Sales

Furniture Sales Furniture Sales

Expenses Expenses Items used to help Items used to help

generate the revenue generate the revenue in a businessin a business

Examples: Examples: TelephoneTelephone

SalariesSalaries

AdvertisingAdvertising

RentRent

Utilities Utilities

The Income StatementThe Income Statement

A financial statement A financial statement used to help a used to help a business calculate business calculate and report its profit or and report its profit or loss on business loss on business operations, operations, over a over a specific period of specific period of time.time.

Remember…Remember…

Remember… Remember…

Revenue – Expenses = Profit/LossRevenue – Expenses = Profit/Loss

How much we make – how much we spendHow much we make – how much we spend

FormattingFormatting

Net Income/Loss is double underlinedNet Income/Loss is double underlined2 columns – inner column for listing 2 columns – inner column for listing revenue/expenses, outer column for totalsrevenue/expenses, outer column for totalsDate always reads “specific time period ended Date always reads “specific time period ended specific date” specific date” Month ended March 30 2014Month ended March 30 2014 Year ended June 30 2013Year ended June 30 2013

A “fiscal year” simply means an accounting year – the A “fiscal year” simply means an accounting year – the business may not have started precisely on January business may not have started precisely on January 11stst!!

Preparing an Income StatementPreparing an Income Statement

Mark’s revenue Mark’s revenue comes from repairs comes from repairs Repairs Revenue Repairs Revenue

$9900 $9900

Mark’s expenses Mark’s expenses Salaries 2600Salaries 2600 Rent 2000Rent 2000 Advertising 850Advertising 850 Supplies Expense 185Supplies Expense 185 Utilities 235Utilities 235 Insurance 150Insurance 150 Delivery 770Delivery 770 Total Expenses? Total Expenses?

Mark’s Repair ShopMark’s Repair ShopIncome StatementIncome Statement

Month Ended March 30 2014Month Ended March 30 2014

RevenueRevenueRepairs RevenueRepairs Revenue 99009900Total RevenueTotal Revenue 99009900

ExpensesExpensesAdvertisingAdvertising 850 850DeliveryDelivery 770 770InsuranceInsurance 150 150RentRent 20002000SalariesSalaries 26002600SuppliesSupplies 185 185UtilitiesUtilities 235 235Total ExpensesTotal Expenses 67906790

Net IncomeNet Income 31103110

Exercise 1Exercise 1

Prepare an income statement for the Law Office of Prepare an income statement for the Law Office of Dewey, Cheetham and Howe for the month ended Dewey, Cheetham and Howe for the month ended December 31 2013, using the following information:December 31 2013, using the following information:

Fees $120 000Fees $120 000 Investment Income $32000Investment Income $32000Salaries $12 750Salaries $12 750 Rent $7600Rent $7600Insurance $5000Insurance $5000 Advertising $3299Advertising $3299Office Expenses $2344 Transportation Expenses $5460Office Expenses $2344 Transportation Expenses $5460Promotion Expenses $3800Promotion Expenses $3800

Law Office of Dewey, Cheetham and HoweLaw Office of Dewey, Cheetham and HoweIncome Statement Income Statement

month ended December 31, 2013month ended December 31, 2013

RevenueRevenueFees Fees 120000.00120000.00Investment Income Investment Income 32000.0032000.00Total Revenues Total Revenues 152000.00152000.00

ExpensesExpenses Advertising Advertising 3299.00 3299.00Insurance Insurance 5000.00 5000.00Office Office 2344.00 2344.00PromotionPromotion 3800.00 3800.00RentRent 7600.00 7600.00SalariesSalaries 12750.0012750.00Transportation Transportation 5460.005460.00Total Expenses Total Expenses 40253.0040253.00

Net IncomeNet Income 111747.00111747.00

Exercise 2Exercise 2

Prepare an income statement forPrepare an income statement for Brookfield Laundromat for the fiscal Brookfield Laundromat for the fiscal

year ending June 30 2013. Select the necessary accounts from the year ending June 30 2013. Select the necessary accounts from the ones listed below. (HINT: some of them would belong on a Balance ones listed below. (HINT: some of them would belong on a Balance Sheet)Sheet)

Cash $1212.70 Cash $1212.70 Accounts Receivable $633 Accounts Receivable $633 Laundry Supplies $651Laundry Supplies $651Machinery/Equipment $13900Machinery/Equipment $13900Trucks $27050 Trucks $27050 Accounts Payable $1746Accounts Payable $1746Bank Loan $23000Bank Loan $23000A. Ottawa, Capital $21006.39 A. Ottawa, Capital $21006.39

Sales $88932.29Sales $88932.29Insurance $7171Insurance $7171Miscellaneous Expenses $225Miscellaneous Expenses $225Rent $22000Rent $22000Telephone $574.25Telephone $574.25Truck Repairs $8146.90Truck Repairs $8146.90Utilities Expense $907.64Utilities Expense $907.64Wages $49908.50Wages $49908.50

Brookfield LaundromatBrookfield LaundromatIncome Statement Income Statement

year ending June 30, 2013year ending June 30, 2013

RevenueRevenue

SalesSales 88932.2988932.29

Total Revenues Total Revenues 88932.2988932.29

Expenses Expenses

Insurance Insurance 7171.00 7171.00

MiscellaneousMiscellaneous 225.00 225.00

RentRent 22000.00 22000.00

TelephoneTelephone 574.25 574.25

Truck RepairsTruck Repairs 8146.90 8146.90

UtilitiesUtilities 907.64 907.64

WagesWages 49908.5049908.50

Total Expenses Total Expenses 88933.2988933.29

Net IncomeNet Income (1.00) (1.00)

Which Statement Is It? Which Statement Is It?

1.1. Accounts ReceivableAccounts Receivable2.2. CashCash3.3. Telephone ExpenseTelephone Expense4.4. LoanLoan5.5. Supplies ExpenseSupplies Expense6.6. SalesSales7.7. Lawyer Fees ChargedLawyer Fees Charged8.8. Accounts PayableAccounts Payable9.9. LandLand10.10. Inventory to sellInventory to sell11.11. Bank Charges Bank Charges 12.12. Miscellaneous Miscellaneous

1.1. Balance SheetBalance Sheet

2.2. Balance Sheet Balance Sheet

3.3. Income Statement Income Statement

4.4. Balance Sheet Balance Sheet

5.5. Income Statement Income Statement

6.6. Income Statement Income Statement

7.7. Income StatementIncome Statement

8.8. Balance Sheet Balance Sheet

9.9. Balance Sheet Balance Sheet

10.10. Balance SheetBalance Sheet

11.11. Income StatementIncome Statement

12.12. Income Statement Income Statement