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.)