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mstillylace
Jun 24, 2008, 09:12 PM
How do I prepare an income statement from this?

Selling and administrative expense $ 60,000
Depreciation expense 70,000
Sales 470,000
Interest expense 40,000
Cost of goods sold 140,000
Taxes 45,000

avenger9000
Jun 24, 2008, 09:19 PM
Answer Limited
Income Statement for the year ended 31st March 2008

Sales 470,000
Cost of sales 140,000
Gross Profit 330,000
Selling and admin expense 60,000
Depreciation expense 70,000
Interest expense 40,000
Operating Profit Before Tax 160,000
Income Tax Expense 45,000
Net Profit After Tax 115,000

mstillylace
Jun 24, 2008, 09:26 PM
How did you get this? If you don't mond explaining?

avenger9000
Jun 24, 2008, 09:31 PM
I got this from the numbers you gave me lol

morgaine300
Jun 29, 2008, 04:30 PM
People jump on my case sometimes for being so picky about just doing people's work for them, but this is a good example of how just doing it for you and showing you the answer doesn't really teach you anything, and it doesn't mean you understand how they got it.

Part of this is just memorizing the different sections and knowing what goes where. The top section is the gross profit section, which is net sales less cost of goods sold. Remember that gross profit is how much something sells for over what it cost the company. So this does not include any other expenses.

The next section is the operating expenses. That's the basic expenses involved in the day-to-day operations of the company. (i.e. if you rent out your back office to someone, that's not part of your operations and does not belong in this section.) It pretty much consists of selling expenses and administrative/general expenses. Your problem has lumped these together in one total. Depreciation actually does go in this section and can be listed both under selling and under administrative, depending on what it's for, but your problem has separated this number out, for reasons I don't know. (You may need that for something.) You'll just have to remember that depreciation is part of operating expenses. Then you subtract operating expenses from gross profit to get income from operations.

Things like interest are considered "other." At a beginning level, you will probably only have interest expense, interest income and rent revenue that might end up in this "other income/expense" section. You might end up with gains & losses. Technically, there should have been a sub-total of Income from Operations before that interest expense. Then subtract out the interest expense for Income before Taxes.

Tax always needs separated and will not be included with any other expenses. So that is subtracted out last, which gets you down to Net Income. The last number at the bottom is always Net Income regardless of how many sections you do or don't have.

This is the closest example I could find to help you:
Multiple-Step Income Statement | AccountingCoach.com (http://www.accountingcoach.com/online-accounting-course/04Xpg04.html#income-statement-multiple-step)

This one lists all the selling & admin rather than lumping them. But it does show the separate section where the interest would go. And it doesn't have the tax expense. But it might give you an idea.