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Income Statement in a Nutshell

income statement uk

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13 views

Income Statement in a Nutshell

income statement uk

Uploaded by

amineissawi.com
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Income statement

Measures an entity’s financial performance throughout the reporting period.

Discloses all income and expenditures of a business enabling the calculation of Net
Income/ Loss and profitability margins.

An illustrative P&L in general terms:

Revenue 100
- Cost of Goods Sold (COGS)/ Services 40
Gross Profit 60
- General Administrative & Sales Expenses 12
EBITDA* 48
- Depreciation & Amortization 8
EBIT** 40
- +/- other revenue & expenses 10
Earnings Before Taxes 30
- Income Taxes 7
Net Income/ Loss 23

EBITDA* = Earning Before Interest Tax Depreciation and Amortization


EBIT** = Earning Before Interest and Tax
Revenues:​ Defined as total sales during the accounting period. Represent the total
amount of money a company receives due to selling its product or service.
COGS:​ All direct costs related to production process or services provided.
General Administrative & Sales Expenses:​ Administrative expenses such as
salaries and sales related: marketing, publicity, sales staff salary.
Depreciation & Amortization:​ The economic amount reduced in the value of an
asset due to economic usage during a period.
Other revenue & expenses:​ Expenses due to interest on lending or borrowing or
exchange rates.

MATCHING PRINCIPLE
Matching Principle requires that expenses incurred by an organization must be
charged to the income statement in the accounting period in which the revenue,
to which those expenses relate, is earned.

EXAMPLE
The majority of a company sales are proceeded as receivables (i.e. are not
exchange with cash at the selling moment). In accordance to the matching
principle, the revenue is recognized when the delivery is made despite not
receiving cash at that exact moment as costs related to the production of the good
have been occurred in that specific accounting period.

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