Financial Statements

Income
Types of Statement
Financial
Statement Statement of
Financial position
 Income Statement

• An Income Statement is prepared for a

business organization to measure the
gross profit, the net profit or loss for
the year for the financial period.

• An Income Statement is prepared at

the end of the financial year for the
transaction done during the year.
 Sections of the Income
Statement

Trading Profit and

section loss section
Two main sections of the Income Statement

❑Trading section – A trading a/c is prepared to calculate the gross

profit earned during the financial year. This deals with buying and
selling.

• Gross Profit = Revenue – Cost of sales

✓ Cost of Sales = Opening Inventory + Purchases + carriage inwards –

purchases returns – closing Inventory
❑ Profit and loss section – This section shows the calculation of final or
true profit. This is the profit for the year after all running expenses.

❖ Profit for the year = Gross Profit + Other Income – Expenses