Financial statements
ACC 220
The first is the Income Statement is an accounting
of sales, expenses, and net profit for a given period – usually one year. It simply lists all sources of income, then
subtracts all expenses. If the final
value is positive, then that is the amount of profits; with a negative value,
the company is losing money. The first
item in an Income Statement is the total Sales (revenue). This includes cash and credit received for
all goods and services sold by the company. The next item is the Cost of Goods
Sold (COGS), which includes items such as raw materials, labor, and overhead
expenses. Since COGS is an expense, it
is subtracted from Sales. The difference is called the Gross Profit or the
Gross Margin. A higher Gross Profit is
preferable for a company, and this can be attained by minimizing COGS. The next item in an Income Statement would be
Operating Expenses, or the things paid for in order for the company to ….
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