INCOME STATEMENT

Multi-Step Format
1. Operation Section
Revenues/Sales : presents various revenue sources, including information on
discounts, allowances and returns.

Less:
Cost of goods/services sold : presents direct costs of goods sold or costs
of services provided in generating the revenues.
Equals:
Gross profit : the difference between revenues and cost of goods sold.
Less:
Selling expenses : presents expenses incurred by the company in its efforts to
generate revenues such as salaries and marketing expenses, delivery costs, and
overhead allocated to sales generating activities.
Administrative and general expenses : presents expenses related to
personnel, accounting, and finance activities, and the operating costs of
headquarters.
Equals:
Income from operations : the difference between gross profit and selling,
general and administrative expenses.
Plus or Minus:

2. Non-operating section
Non-operating items: presents income and expense items that are routine and

ordinary but not components of the companys operations such interest income and
expense, royalty income and dividend income.
Equals:
Net income before tax : presents the amount of taxable income from
operations.
Less:
Income tax expense : presents the income tax expense applicable to income
recognized up to this point in the statement.
Equals:

Net income from operations before extraordinary items

Plus or Minus:
Discontinued operations : presents gains and losses, net of income tax,
resulting from the disposal of a segment of a business.
Extraordinary items: presents gains or losses, net of income tax, resulting
from unusual and infrequent items.
Equals:

NET INCOME