INCOME STATEMENT

Gr 9 BD
OBJECTIVE

 To examine the need for preparing a

trading account section of income
statement
 To understand the key formulas to prepare
trading account section of income
statement
 KEY WORDS
 Revenue
 Purchases
 Opening Inventory
 Closing Inventory
 Cost of sales
 Gross profit
 Gross loss
PURPOSE

 Trading account section of Income Statement

is prepared to arrive at thegross profit /gross
loss made by a business during a particular
accounting period
TRADING ACCOUNT SECTION

 Trading account section is prepared to

calculate the result of trading ,that is the
result of buying and selling
 The result will be either gross profit or gross
loss
 FORMULAS

 Revenue –Cost of Sales = Gross profit

 (Note : If cost of sales is high ,the result
will be gross loss)
 COST OF SALES

 Opening Inventory +Purchases –Closing

Inventory