How to Format an Income Statement
Income statement shows the company’s performance over the course of year. It is the representation of the revenues, expenses and net income with some formatting that is understandable to a layman. It is an essential requirement for the company and the recent legislation has put a stipulation on every listed firm to at least produce an income statement after every quarter and issue it to general public so that investors can take decision based on that. An audit is conducted on the prepared income statement and all the falsification can be countered easily so the issued income statement is a reliable source which can be used as the basis for the data that is used to analyse the situation of the firm. Quarterly income statement shows the performance of the firm in the past four months while the annual income statement shows the yearly performance of the firm. The sample figures are used to make the entire understanding process simpler.
Instructions
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1
First of all you have to understand how the income statement’s heading is listed. It is placed in between the category and its figures. The following step will indicate how it is placed.
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2
You have to calculate the total revenue of the firm. All sorts of revenues should be taken into consideration while preparing the income statement. See the example below:
Blue Bird Enterprises
Income Statement
For the Year Ended December 31, 2002
Net Sales Revenue $1000
Rental revenue 500
Interest revenue 50
Total Revenue $1550 -
3
Now you have to calculate the amount of expenses. Add all sorts of expenses you incurred in the stated time period. See the example below:
Expenses
Rent paid 50
Depreciation 50
Maintenance 20
Salary and wages 100
(Add all other expenses you have)
Total expenses $220 -
4
Now subtract the total expenses from total revenue to get the figure of Net Income before Interest and Tax.
NPBIT (1550-220) $1330
Now subtract total interest incurred in the period.
Interest $800
Net Profit After Interest and before Tax $530
Subtract Tax now (530*35%) $185.5
Net Profit After Interest and Tax $344.5 -
5
This is the basic format of the Income statement that is in place for the calculation of profit. You can either include the distribution of profit in the same statement or differently depending on your choice.
