Profit or Loss

The Income Statement

The Income Statement

A summary of the company’s financial activity over a certain period of time, such as a month, quarter, or year. The statement starts with Revenue earned, subtracts out Costs of Goods Sold and the Expenses, and ends with the bottom line – Net profit or loss.

Revenue

These accounts track all money coming into the business, including Sales of product Interest earned on savings Sale of asset Interest from loans made to employees or other

businesses

Cost of Goods Sold (Sales)

Before you can sell a product, you must spend some money to buy or make that product. Purchases – items you plan to sell (inventory)

Raw materials Work-in-process inventory Finished-goods inventory

Discounts and returns go through this account Freight charges Other sales costs (catch all account)

Journal Entry

(Cost of sales account)(Financed some)

(Paid cash for some)

Expenses

All money spent to operate the company that’s not directly related to the sale of goods or services

Advertising Office expenses

Bank Service Charges Payroll Taxes

Dues and Subscriptions Postage

Equipment Rental Rent

Insurance Salaries and Wages

Legal and Accounting Supplies

*Travel and Entertainment, Telephone, Utilities, Vehicles

Landscapers Profit & Loss (Income) Statement

Gross Profit

This reflects the profit generated from sales minus the cost of the goods sold.

Income – cost of goods sold = Gross Profit

Net Income or Loss

This is the bottom line that tells you whether the company made a profit or operated at a loss.

Gross profit (Income – cost of goods sold) - Expenses = net Profit