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Income statement

From Academic Kids

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Income statements for companies indicate how Net Revenue ( money received from the sale of products and services before expenses are taken out, also known as the "top line") is transformed into Net Earnings (the result after all revenues and expenses have been accounted for, also known as the "bottom line"). In general terms, an income statement shows this through the following calculation:

Net Revenue
- Cost of Sales (cost of products sold and services)
= Gross Margin or Profit
- Research and Development expense
- Selling, General and Administrative (SG&A)
- Depreciation
= Operating Profit (earnings before interest and taxes or "EBIT")
- Interest expense
= Earnings before taxes
- Taxes
= Net Earnings

Elements of the income statement used in accounting are net income results from revenue, expense, gain, and loss transactions.

Contents

Revenues

Revenues - Inflows or other enhancements of assets of an entity or settlements of its liabilities during a period from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.

Expenses

Expenses - Outflows or other using-up of assets or incurrences of liabilities during a period from delivering or producing goods, rendering services, or carrying out other activities that constitue the entity's ongoing major or central operations.

Line items

  • General and administrative expenses (G & A)
  • Interest expense
  • Income tax expense
  • Minority interest
  • Selling, General, and Administrative Expenses (SGA, SG&A)

Income

Gains - Increases in equity (net assets) from peripheral or incidental transactions of an entity except those that result from revenues or investments by owners.

Losses - Decreases in equity (net assets) from peripheral or incedental transactions of an entity except those that result from expenses or distributions to owners.

External links

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