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Income Statement


24 Minute Accounting

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Unit Video

Unit Summary

The two main sections of an Income Statement are:
  • Operational
  • Non Operational

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Hi, in this video you will learn about the Income Statement. This statement can also be referred to as a P & L (Profit & Loss) or Earnings Statement.
The Income Statement is one of the most important Financial Statements that a company produces. It measures the financial performance over a given period of time. You can run the statement for a month, a quarter, year to date, or even for a whole year.
All businesses, companies and even NGO’s need to know how they performed; did they make a profit or a loss, or in the event of NGO’s, where did their funding go.
The Income Statement is set out in two main sections; Operational & Non Operational.
  1. Operational – this section is associated to the regular activities of the business. This section is split into three (3) main sections:
  • Revenues – all sales income is recorded in this section
  • Cost of Sales – all direct costs related to the sales, be it costs of the products sold or the services provided, are all mentioned here.
  • Overhead or Operational expenses – all expenses that help you to run your operations like office rent, salaries, telephone expenses, etc, are included here.
  1. Non Operational – All revenues and expenses that are not within the regular business activities are included here. For example, if you are in the business of producing canned food, then the proceeds from selling equipment or a company car is recorded here.Now there are two main figures that you should focus on.
  • Gross Profit (GP) margin
  • Net Profit (NP) margin
With healthy GP & NP margins, your business is shore to be on the fast track to success, however don’t forget that your Balance Sheet & Cash flow statements are just as important.

People will just walk away if they don’t have a healthy Income Statement. Francis Gaskins