INCOME

STATEMENT
 There are two widely used
forms of Income Statement.

1. Single-Step

2. Multi-Step
 SINGLE STEP FORM

It has the advantage of

simplicity as it emphasizes total
revenues and expenses as
determinants of net income.
 MULTI STEP FORM
The Multi-step income statement is so
called because of the many sections,
sub-sections and intermediate balances
which make relationships of gross profit
to sales and income from operations to
sales easily available.
 INCOME
STATEMENT
ACCOUNTS OF A
MERCHANDISING
CONCERN
 NET SALES
– the excess of Sales over amount
of the Returns and Allowances.
Sales Discounts may also be
deducted to arrive at net sales.
 COST OF SALES OR COST
OF GOODS SOLD
-the information on costs incurred
in merchandise sold helps the
owner to provide the desired
margin of profit by setting up the
selling prices of goods.
 GROSS PROFIT
- this is computed by deducting
Cost of Sales from Net Sales. Gross
Profit should be adequate enough to
absorb operating expenses as well
as provide a return on capital
 OPERATING EXPENSES

These are expenditures

incurred in the normal operations
of the business.
a.) SELLING EXPENSES –
expenses that bear a direct effect on
the selling functions of the firm.
Examples: Advertising expense,
traveling expense of salesmen,
salesmen’s commission, salesmen’s
salaries, expenses on delivery.
b.) GENERAL EXPENSES-
expenses incurred which are not
connected to the selling functions.
Examples: Rent expense, property
taxes, postage, utilities expense,
office supplies, and insurance.
 NET PROFIT FROM
OPERATIONS
This is normally the gauge used in
assuming the profitability and
success of the business. This is the
excess of Gross Profit on Sales over
Operating Expenses.
 OTHER INCOME
A Merchandising concern has
other sources of income aside from
its main source like Purchase
discounts, Interest income, gains on
sale of merchandise items.
 OTHER EXPENSES
These are expenses incurred and
losses as well, which are results of
transactions not in connection with
the regular operations of the
business like sales discounts, and
interest expense
 NET INCOME
When all the costs, expense and
losses have been deducted from all
incomes of the business, the result is
called net income. Net Income
represents the increase in capital of the
owner resulting when revenues exceed
expenses.