INCOME STATEMENT

An income statement shows your profit or loss for a particular period of time, detailing all revenues and expenses. It should be prepared on a monthly or quarterly basis to allow for proactive management to make any necessary changes. The income statement is primarily an accounting tool to measure a business' performance.

Another useful tool that will help you to measure your business performance at the outset is the break-even analysis. You can measure your breakeven point in level of sales in either dollars or units where revenue equals total cost.

Use this worksheet to prepare your Income Statement if you are already in business, and as a format for pro forma (projected) income statements.

Income Statement for a Small Business
Time Period - Projected or Actual	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Full Year
Sales	$
> >Opening inventory	$
> > + Purchases (direct materials)	$
> > + Production wages*	$
. > . - Closing inventory	$
(Less) Cost of goods sold (COGS)	$
Gross profit (or income)	$
Expenses
Amortization expense
Advertising & marketing
Bad Debts
Insurance
Interest expense
Maintenance
Management fees
Office expenses
Rent or mortgage interest
Salary - owner
Storage
Travel (other)
Utilities
Vehicle expenses
Wages (staff)
Total expenses	$	$	$	$	$
Earning (or loss) before taxes
. . Less Income Taxes
Net Earnings (or loss)

* Wages are only included in manufacturing businesses; in retail businesses wages are operation's expense.

• Gross profit (or income) is obtained by deducting the costs of goods sold from sales.
• Net earnings (or profit) or loss is obtained by deducting all expenses from the gross profit.
• Net earnings is the amount to be transferred to the retained earnings section of the balance sheet.

- Financial Tools -

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