Question

Briefly describe the format of the income statement.

Answer 1

The income statement of a company indicates the profitability of the company.The income statement shows the revenue and expenses of the company, and is used by the stakeholders of the firm for decision making purposes..The income statement of a company begins with the Sales (revenue) and then deducts the Cost Of Goods Sold From The sales revenue to arrive at the gross profit.The COGS include items like direct materials,direct labor and overhead.expenses..From the Gross profit the various operating expenses incurred by the firm is deducted.Deducting operating expenses from the Gross profit we arrive at the operating profit.The operating profit is also known as Earnings Before Interest And Tax(EBIT). From EBIT the interest is deducted to get the Earnings before tax (EBT) and after deducting Tax we get the Net Income.

The format of an income statement(just the steps)

Sales(revenue)Less COGS =Gross Profit Less Operating Expenses we get EBIT less Interest we get EBT less Tax We get Net Income.