Profit Statement in iGreen Accounting

In any business owner and manager it is very important to have exact report of profit and loss statement. but calculating profit statement is not easy process. actually profit and loss statement is a sub statement of income statement in every company

Methods of Profit Statement

There many methods to get profit statement report but commonly we can list them as below:

  • FIFO
    • It means price of first item has been purchased and and price of the first sales item
  • LIFO
    • It mean price of the latest item for purchase price and price of the first sales item
  • Average of prices
    • It means average price of all purchases and Average price of all sales
  • Unique Price code
    • In this method, each item will get a unique serial number label with a its price of purchase and sales

FIFO will be used for food industrial and business with expiring date of products, LIFO will be used for update to date businesses like CAR companies,  Average method is common method for shops and retail stores.

Unique price code is the best method, each item in purchase time will get a unique barcode label with a unique serial number and at sales time, this barcode will be scanned and entered in invoice. so that, each item one by one, has its purchase price and sales price exactly.

iGreen accounting supports methods of average price and unique price code. for price code method , iGreen accounting will give you printed labels to stick it on items as same time of purchase.

 

Multiple-Step Income Statement

First look as below picture that is an example of Multiple-Step statement

The income statement, Multiple sample

The multiple-step income statement presents figures significant in the determination of net income. Its various classifications define the on-going operations of the business entity, providing a perspective as to its flow of revenues and expenses.

The usual multiple-step classifications are:

  1. Revenue From Sales: In this section, usually called Gross Sales, revenue (income) earned from normal operations is summarized. It is offset by the contra income accounts, Sales Returns and Allowances and Sales Discounts.
  2. Cost of Goods Sold:This section includes the cost of goods applicable to the revenue obtained for the period. Its presentation is slightly different for a mercantile than a manufacturing company since the former does not have inventories of raw materials, goods in process, direct labor or manufacturing overhead. It has only furnished goods, called merchandise inventory. Once the manufacturing schedule is completed, its bottom line (cost of goods manufactured) is incorporated in the cost of goods sold section of the income statement.
  3. Gross Profit on Sales: This figure is the difference between net sales and cost of goods sold. It is frequently divided by net sales to determine the average percentage of margin for the fiscal period. The same ratio is developed for cost of goods sold and it can easily be seen that they are complementary.
  4. Operating Expenses: These are often classified according to the major functions of the business (i.e., selling, general and administrative). Terminology may differ as appropriate; however, taxes on income, extraordinary items and prior period adjustments must be segregated at the bottom of the statement. Selling expenses typically include sales salaries, commissions, related payroll costs, advertising, store display costs, store supplies used, etc. General and administrative expenses include officer and office salaries and related payroll taxes, telephone and communication costs, heat, light and power costs, postage and office supplies, legal and accounting costs, etc.
  5. Other Income and Expense: include all other miscellaneous recurring items. Other income includes interest, dividends, rents and royalties: other expense includes interest and miscellaneous expenses.
  6. Income Taxes:  Total income taxes due is presented as a single figure on the income statement and is applied against the subtotal, Net Income before Income Taxes. Income from normal operations is often supplemented by a gain or loss from extraordinary items. The amount directly applicable to income from normal operations is taxed at normal rates. Extraordinary items are often taxed at lower capital gains rates. The applicable tax for each extraordinary item should be deducted and the net amount shown on the income statement. Note: Property, payroll and excise taxes are properly allocated to the various business functions as normal operating expenses.
  7. Net Income: The excess of revenues over expenses. In the multiple-step format, separate captions are generally shown for Income Before Taxes, Income Before Extraordinary Items, and Net Income.
  8. Extraordinary Items: Those events and transactions which are material in amount and which are significantly different from the regular activities of the business (APB Opinion No.9). Extra ordinary or nonrecurring earnings, when included in the income statement, are shown below (separately from) regular earnings.

 

Next Page: Income statement concepts

Single-Step Income Statement

First look at below picture:

Income statement, Sample of single step

 

A simple, condensed statement devoid of all classification except the general groupings:

  • Revenues
  • Cost and expenses has been developed for stockholders’ reports and other special uses.

Section labeling is at a minimum. The single-step format does not recognize intermediate stages such as gross profit from operations or income before extraordinary items. All income, including rents, interest, dividends, etc., is included in the first section. All costs and expenses are shown in the next, including Federal and state taxes on income. This form tends to be compact and relatively uncluttered at the sacrifice of information. Generally the costs and expenses are classified on the object basis rather than the functional basis.

When the object basis is used, the nature of each cost and expense rather than whether it serves manufacturing,
selling, general and administrative, or some other function is the controlling factor. Examples of this classification are such broad captions as materials, supplies and services purchased salaries and wages, and depreciation. The functional basis, on the other hand, expands the income statement so that it includes major classifications such as cost of goods sold, sales revenues and operating expenses as major headings, with applicable sub functions in each category.

It should be noted that the required separation of ordinary and extraordinary items resulting from application
of APB Opinion No. 9 also applies to the condensed single-step form.

Sales Income Statement in Accounting

What is sales income statement

When you purchase an item and sell it then usually you should earn money. All shop should earn money from selling items and report of this money will call sales income statement.  some other term like invoice income, selling income, … maybe you listen but official name of this type of report is: Sales Income Statement

Importance of sales income statement

This report is the most wanted report in any business because more income from sales will save the business and will cause the business grow up more and more. you could not find any owner that doesn’t like to have a good income from sales section of her/his business.

Calculate of sales income statement

To access this report there are some ways like:

FIFO and LIFO will use for items that have unique serial no and any items maybe have a unique price of purchase and sales. if your items don’t have serial no you could not trace their price in purchase and sell and you should use average method.

FIFO means: first in and then first out (first purchased item should sell first of all)

LIFO means: last in first out  (Last purchased item should sell first of all)

Average price: usually normal shop uses this method  to calculate their profit as below:

(Average sold price –  Average purchase price)  *  Quantity of sold items => Profit of sales

 

Single-Step Income Statement

Multiple-Step Income Statement