Business People Club

Parts of an Income Statement, part 1

0 like 0 dislike
202 views
in Articles - Butcherry
The first and most important part of an income statement is the line reporting sales revenue.  Businesses need to be consistent from year to year regarding when they record sales. For some business, the timing of recording sales revenue is a major problem, especially when the final acceptance by the customer depends on performance tests or other conditions that have to be satisfied. For example, when does an ad agency report the sales revenue for a campaign it's prepared for its client? When the work is completed and sent to the client for approval? When the client approves it? When the ads appear in the media? Or when the billing is complete? These are issues a company must decide on for reporting sales revenue, and they must be consistent each year, and the timing of reporting should be noted on the financial statement.

The next line in an income statement is the cost of goods sold expense. There are three methods of reporting cost of goods sold expense. One is called "first in-first out" (FIFO); another is the "last in-last out" (LIFO) method and the last is the average cost method. Cost of goods sold expense is a huge item in an income statement and how it's reported can make a substantial impact on the reported bottom line.

Other items in an income statement include inventory write-downs. A business should regularly inspect its inventory carefully to determine any losses due to theft, damage and deterioration, and to apply the lower of cost or market (LCM) method. Bad debts are also an important component of the income statement. Bad debts are those owed to a business by customers who bought on credit (accounts receivable) but are not going to be paid. Again the timing of when bad debts are reported is crucial. Do you report it before or after any collection efforts are exhausted?

Please log in or register to reply to this post.

Related posts

0 like 0 dislike
0 comments 236 views
0 like 0 dislike
0 comments 205 views
0 like 0 dislike
0 comments 206 views
0 like 0 dislike
0 comments 216 views
0 like 0 dislike
0 comments 212 views
0 like 0 dislike
0 comments 254 views
0 like 0 dislike
0 comments 169 views
0 like 0 dislike
0 comments 255 views
0 like 0 dislike
0 comments 164 views
0 like 0 dislike
0 comments 296 views
0 like 0 dislike
0 comments 232 views
0 like 0 dislike
0 comments 225 views
0 like 0 dislike
0 comments 1,247 views
0 like 0 dislike
0 comments 338 views
0 like 0 dislike
0 comments 317 views
0 like 0 dislike
0 comments 298 views
0 like 0 dislike
0 comments 306 views
0 like 0 dislike
0 comments 333 views
0 like 0 dislike
0 comments 319 views
0 like 0 dislike
0 comments 310 views
0 like 0 dislike
0 comments 293 views
0 like 0 dislike
0 comments 290 views
0 like 0 dislike
0 comments 298 views
0 like 0 dislike
0 comments 321 views
0 like 0 dislike
0 comments 296 views
0 like 0 dislike
0 comments 281 views
0 like 0 dislike
0 comments 316 views
0 like 0 dislike
0 comments 269 views
0 like 0 dislike
0 comments 312 views
0 like 0 dislike
0 comments 304 views
0 like 0 dislike
0 comments 303 views
0 like 0 dislike
0 comments 270 views
0 like 0 dislike
0 comments 290 views
0 like 0 dislike
0 comments 264 views
0 like 0 dislike
0 comments 312 views
0 like 0 dislike
0 comments 243 views
0 like 0 dislike
0 comments 238 views
0 like 0 dislike
0 comments 251 views
0 like 0 dislike
0 comments 249 views
Connect with us:
...