Preparing An Income Statement

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Net purchases formula

purchases - purchase returns and allowances - purchase discounts

Sections Of Income Statement

revenue, cost of merchandise sold, operating expenses, other revenue(income not earned from day to day operations)

Net Sales Formula

sales revenue - sales discounts - sales returns and allowances

income from operations

the operating revenue remaining after the cost of merchandise sold and operating expenses has been deducted

cost of merchandise sold

the original price of all merchandise sold during a fiscal period

Cost of Merchandise sold formula

Beginning merchandise inventory + net purchases= total cost of merchandise available for sale. Total cost of merchandise available for sale- Ending inventory= cost of merchandise sold

Gross profit formula

Net Sales - Cost of Merchandise Sold

net sales

The amount of sales, less sales discounts and sales returns and allowances.

operating expenses

The expenses incurred by a business in its normal operations.

Gross Profit

The operating revenue remaining after cost of merchandise sold has been deducted.

Operating Revenue

The revenue earned by a business from its normal business operations.

statement of stockholders' equity

a financial statement that shows changes in a corporation's ownership for a fiscal period

par value

a value assigned to a share of stock and printed on the stock certificate. Value of shares=par value* Shares issued

retained earnings

cumulative net earnings or profits a business has after accounting for dividend payments


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