2. report prepared outside the ledger
for presentation to interested parties
detailing the various revenues and expenses for a period
and
calculating the resultant profit or loss
3. is not part of the double-entry process
contains information that can be
classified for enhanced understandability
ie items are classified as revenues,
expenses etc
is prepared at any time
4. Gross Profit
Gross Profit/Loss is calculated in the Income
Statement
Gross Profit represents the profit generated by
the business from the sale of goods/services. (ie
Net Sales – COGS)
Important to determine Gross profit/loss
because the buying and selling of goods is the
main form of revenue raising for business
If Gross profit is insufficient business may
struggle to cover remaining overheads and
measures must be put in place
5. Improving Gross Profit
Increase selling price of stock
Improve/modify marketing techniques
Reduce cost of goods sold:
- investigate alternative
suppliers
- take advantage of discounts
6. Net Profit
Remaining revenues are added to Gross
Profit
Expenses are then deducted to determine
net profit/loss
Net profit indicates the likely return to
the owner
Net profit is dependant upon the
effectiveness of management to minimise
remaining overheads
7. J Thomas
Income Statement
for year ended 30 June 2004
Sales 10 000
Less Sales Returns 500 9 500
Less Cost of Goods Sold 2 100
GROSS PROFIT 7 400
Add Other Revenue
Commission revenue 100
Rent revenue 100 680
6 720
Less Other Expenses
Sales wages 1 000
Insurance 3 200
Discount Expense 1 500 5 700
Net Profit $1 020
