How to Format an Income Statement

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Format an income statement by including the revenues, cost of sales, other income, other expenses and income tax provisions. Disclose the net income of a company to public shareholders with advice from a certified public accountant in this free video on accounting.

Part of the Video Series: Finance & Accounting Facts
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Video Transcript

My name is Miranda Chook, a CPA. Income statements are one of the required financial statements that is required by generally accepted accounting principles. The main categories that you'll find on an income statement start at the top with revenues or sometimes they're called sales, or in the case of banks it's called net interest income. If there are other sources of of revenues or sales then you'll also see that listed. Then, the next major category that you'll see on an income statement are the cost of sales or cost of goods sold, or net interest margin, excuse me, net interest expense in the case of a bank. So again, these are the costs that are directly related to generating those revenues and sales that were in the in the previous category. The difference in these two line items is your gross margin, or in the case of banks, net interest margin. Following this major line item are other income and other expense. For example, in the case of of banks there may be other items that generate income, such as credit card fees, that you would see in other income. After other income, or and/or expenses are deducted from the gross margin then you will have what is commonly referred to as operating income or income before taxes. Some companies like to show income before interest, as well as taxes. Then, after operating income and/or expense is deducted from gross margin then you will arrive at operating income. Some companies like to present this before interest in taxes, and some companies just present this before taxes. Then, of course, you'll have your provision for income taxes. Then, you will arrive at net income, and then one other item that is required to be disclosed for public companies will be your earnings per share.


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