16-1: Preparing an Income statement

what 3 financial statements do corporations need to prepare?

income statement, balance sheet, and stockholders' equity

what are the steps and accounts used for the operating revenue section?

just get sales, subtracting in contra account sales discount and returns and allowances, to get net sales

what are the 4 main sections of corporation income statement, in order?

operating revenue, cost of merchandise sold, operating expenses, and other revenue

net purchases formula

purchases - purchases discount and purchases returns and allowances

operating revenue

revenue from normal operations

how do you calculate net sales?

sales - (sales discounts + sales returns and allowances)

net sales formula

sales - sales discount and sales returns and allowances

Operating Expenses

Expenses from normal operations

Cost of Merchandise sold is also called

Goods sold Or cost of sales

Gross profit is often referred to as

Gross profit on sales

Income from operations

Operating revenue - (cost of merchandise sold + operating expenses)

gross profit

Operating revenue - cost of merchandise sold (operating expenses isn't taken from this until we get to income from operations)

cost of merchandise sold

Original price of all merchandise sold during a fiscal period

what are the steps and accounts used for the cost of merchandise inventory section?

add merchandise inventory and purchases (minus discounts and returns/allowances) to get total cost of merchandise available for sale, then subtract ending merchandise inventory to find the cost of merchandise sold (for the period)

what are the steps and accounts used for the other revenue section?

add other incomes to the total income from operations (like interest income). Then calculate net income before and after subtracting federal income tax

what are the steps and accounts used for the operating expenses section?

add up all the expenses and subtract that from gross profit

cost of merchandise sold formula

beginning of merchandise inventory + net purchases = total cost of merchandise available for sale - ending merchandise inventory