Income statement:
　　Mr. W Xang
　　Income statement for the year ended 31 December 20X6

 

$

$

Sales revenue

　

33,700

Opening inventory

3,200

　

Purchases

24,490

　

　

27,690

　

Less: Closing inventory

（2,390）

　

Cost of sales

　

（25,300）

Gross profit

　

8,400

　

　

　

Less: Expenses

　

　

wages

3,385

　

rent

1,200

　

Sundry expenses

365

　

　

　

（4,950）

Net profit

　

3,450

　　●Showing the financial performance of a business over a period of time.

　　●Reports revenue and expenses for the period.

　　●The sales revenue shows the income from goods sold in the year

　　●The cost of buying the goods sold must be deducted from the revenue

　　●The current year’s sales will include goods bought in the previous year, so this opening inventory must be added to the current year’s purchases.

　　●Some of this year’s purchases will be unsold at 31/12/20x6 and this closing inventory must be deducted from purchases to be set off against next year’s sales.

　　●The first part gives gross profit. The second part gives net profit.

　　The I.S. prepared following the accruals concept.

　　Accrual concept:

　　●Income and expenses are recorded in the I.S. as they are earned / incurred regardless of whether cash has been received/ paid.

　　(Sales revenue: income from goods sold in the year, regardless of whether those goods have been paid for.)