Basic Accounting - Income Statement

The income statement is supposed to show profit and loss over time.

There are relative items in the income statement:

  1. Sales Revenue: The revenue from sales of goods or services. This is gross of the costs.
  2. COGS (Cost of Goods Sold): The aggregate direct costs associated with selling the products or services. This includes labor, parts, or materials.
  3. Gross Profit: Sales Revenue – COGS. 
  4. Marketing, Advertising, and Promotional Expenses: Expenses related to marketing and advertising. 
  5. (SG&A) Selling, General and Administrative Expenses: Other costs associating with running the business. This includes salaries and wages, rent and office expenses, insurance, travel expenses, and sometimes depreciation and amortization. 
  6. EBITDA: Earnings before Interest, Tax, Depreciation, and Amortization. Gross Profit – SG&A. 
  7. Depreciation and Amortization Expense: Non-cash expenses which spread out the cost of long term assets or how debt payments are spread out. 
  8. Operating Income: (EBIT) Any profit before income taxes and interest expenses. 
  9. Interest: Interest paid on liabilities. 
  10. Income Taxes: Taxes paid to the government charged on pre-tax income. 
  11. Other Expenses: research and development, and other expenses. 
  12. Net Income: Profits after taxes and interest.

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