1、Lesson Seven:Income Statement Aims:1.Explain how accountants measure income.2.To introduce the accounting concepts which govern profit measurement.3.To understand the importance of gross profit.4.To construct the income statement of a Sole Trader.7.1Income Statement:Introduction Income statement acc
2、ount(also called the profit or loss account)is a report presenting all figures concerning revenue,cost and expense accumulated during a whole year.7.2The Calculation of Profit In accordance with the accruals concept profit is calculated by matching:(1)Income earned during the period(whether received
3、 or not);(2)Expenses relating exclusively to the period/used up(whether paid for or not).7.4The Importance of Gross Profit Income statement for Month 1Sales(3units1.5$4.5Less cost of salesPurchase(51)$5.00Less closing stock(21)$2.00$3.00Gross profit1.5$7.5Next Month:Example(Continued)Month 2:Purchas
4、es7 articles$1.00 Sales8 articles$1.50 Required:Calculate the Gross Profit for Month 2.Income statement for Month 2$Sales(8 units)12.0Less Cost of Sales:Opening Stock(2 units)2.00Add Purchases(7 units)7.00(Available for sale 9 units)9.00Less Closing Stock(1 unit)1.008.00Gross Profit(33.33%)4.007.6Th
5、e Preparation of the Final Accounts of a Sole TraderTrial Balance as at December 31st,2012$Stock at Jan.1st,20124 000Purchases50 560Sales74 130Wages and salaries13 700Rent received1 290Rates2 960Office expenses2 500Telephone1 500Trade Debtors8 950Trade Creditors3 860Office equipment5 980Motor vehicl
6、es9 800Drawings15 960Cash at bank4 970Sammys capital41 600120 880 120 880Income statement for the year ended Dec.31st,2012Sales$74 130Less Cost of Sales:4 000Opening stock50 560Add Closing stock54 5604 69049 870Gross Profit24 260Add Other Income1 290Rent received25 550Less OverheadsWages13 700Rates2
7、 960Office expenses2 500Telephone1 50020 660Net Profit 4 890 Business Balance SheetAs at Dec.31st,2012Current Assets Cash&Bank$4 970Trade Debtors8 950Stock4 69018 610Fixed AssetsOffice Equipment5 980Motor Vehicles9 80015 780Creditors:amounts due within one yearTrade Creditors3 860Net Current Assets14 750$30 530RepresentingEquity30 530Sammys Capital$30 530
