Income Statement

Income Statement Bookkeeping Services

Income Statement Bookkeeping Services

Income Statement Service in NYC and the Surrounding Areas

The income statement is one of the most important financial reports because it shows the profitability of your company. The income statement highlights your company's revenue and expenses, as well as any gains and/or losses your company may incur. An income statement can be prepared on a monthly or quarterly basis and we also offer an annual income statement preparation package also.  

You can use the income statement to monitor your company's performance for a particular period by comparing it to the same period in prior years. A prior year comparison can highlight significant increases or decreases in revenue or expenses from the previous year. If significant variances from the prior year exist and were unexpected, the comparison could reveal the need for your company to focus on modifying current year objectives.

Our business planning services can assist you in making necessary changes to your operations in order to ensure your company remains profitable. Perhaps operations need to be streamlined or expenses reviewed for cost savings opportunities.    

Revenue - Revenue is presented on the income statement as one of the following:
  • Income from operating activities
  • Income from non-operating activities
  • Gains
Income from operating activities is the revenue from the sale of goods or services your company provides.  Income from non-operating activities includes any passive income your company receives, such as interest or rental income. 
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Income Statement Service in NYC and the Surrounding Areas
Gains include income received from the sale of fixed assets or investments. A gain is recorded when your company receives a higher value for fixed assets or investments sold during the ordinary course of business. The recorded gain is for the amount of the sales price that exceeds the value of the asset or investment recorded on your books.

For example, if you decided to sell a company car with a book value (book value equals the asset's purchase price less accumulated depreciation) of $20,000 for $30,000 cash, a gain of $10,000 is realized. 
Expenses - Expenses are costs incurred in the ordinary course of doing business. Expenses can be categorized as one of the following: 
  • Cost of Goods Sold
  • Operating Expenses
  • Non-operating expenses
  • Losses
Cost of goods sold is the cost of buying or making a product to be sold. Cost of goods sold is calculated using the following formula:
  • Beginning Balance of Inventory
  • Plus:   Purchases made during the period
  • Goods available for sale
  • Less:   Ending inventory balance
Operating expenses include the cost of doing business and are categorized as selling expense and general and administrative expenses. Selling expenses include the costs your company incurs to sell or distribute its product, such as advertising and marketing costs, sales commission, and freight costs. General and Administrative expenses are costs your company incurs that are not directly related to the sale of products such as salaries, rent expense, and utility payments.

Non-operating expenses are passive costs your company incurs, such as interest expense.

Losses occur when your company sells a fixed asset or investment for a value less than its book value. A loss is recorded for the difference between the sales price and the book value of the fixed asset or investment sold during the ordinary course of business. Using the example used for to describe recording a gain, we can say your company decided to sell a company car with a book value (book value equals the asset's purchase price less accumulated depreciation) of $20,000 for $15,000 cash, a loss of $5,000 is realized.
We prepare a multi-step income statement for clients but do offer a more basic format at the request of clients. The multi-step income statement separates revenue and expenses by category. Cost of Goods sold is subtracted from Sales to compute gross profit for the period.

Gross Profit - Gross profit is revenue directly tied to the sale of goods and services before adjustments are made for operating and non-operating income and expenses. Next, operating expenses and operating income are subtracted from gross profit to calculate operating income. Non-operating items are then added and subtracted from operating income to figure your company's net income.  

Depreciation Expense
- If you purchase a truck for your company, the purchase is initially recorded by debiting the fixed asset account (i.e., truck) and crediting cash (or accounts payable if paid for on account).

Truck                                          $30,000
Cash (or Accounts Payable)    $30,000

A monthly entry to record depreciation expense is also required. Depreciation expense is calculated by determining the useful life (number of years you expect to use the asset) and the salvage value of the asset at the time it is expected to be retired (not used by your company any longer). The salvage value is the amount you expect to receive for the asset (the truck) at the time of retirement. The salvage value may be $0 or higher if you plan to sell the car to a third party.  

Using the truck example, let's say you expect to use the truck for 7 years and the truck's salvage value to be $8,000 because you are planning to sell it to a used car dealership after the seven years. If you paid $22,000 for the truck your monthly depreciation would be $2,000 per month. Depreciation is calculated as follows:

Purchase price - salvage value
Useful life

The trucks book value is calculated by subtracting accumulated depreciation (sum of all depreciation expense) from the purchase price. At the end of the fourth year, the book value of the truck in the above example would be $14,000:

Purchase Price                                    $22,000
Less:  Accumulated Depreciation    $8,000 = ($2,000 * 4 years)
Truck's book value                             $16,000

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Please contact us for ore information on how we can help your business grow, as well as schedule a free consultation with our Bookkeepers.
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