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Financial statement (view source)
Revision as of 19:17, February 23, 2018
, 19:17, February 23, 2018add part 2 (income statement)
*Minority (non-controlling) interest in other entities
*Minority (non-controlling) interest in other entities
*Retained earnings (the amounts earned by the company from its operations)
*Retained earnings (the amounts earned by the company from its operations)
==Income Statement==
The '''income statement''' shows how the [[revenue]]s of an entity are turned into [[net income]]. (In non-profit/not-for-profit entities, the term '''statement of activities''' is used instead.)
The statement is divided into three sections: '''operating''', '''non-operating''', and '''irregular'''.
The operating section is the most comprehensive as it discusses the profitability of the entity's main line of business. It generally consists of a '''revenue''' line (sales price of goods or services) and one or more '''expense''' lines. The expense lines consist of:
*'''cost of goods sold (COGS)''', which could be (for a retailer) the purchase price of items held for resale, or (for a manufacturer) costs of raw materials, labor used to turn the materials into saleable items, and overhead (depreciation/amortization of buildings and equipment, utility costs, and such),
*'''selling, general, and administrative (SG&A)''' expenses, which could be sales salaries/commissions, freight on shipped items sold, depreciation on stores and furnishings, and costs to operate overall company management and back-office (accounting, human resources) operations, and
*'''research and development (R&D)''' activities.
The non-operating section includes revenue and expenses from sources other than the main line of business. Such items include gains/losses from sales of assets no longer used in the business, income from investments, and interest on borrowings. It also includes taxes payable during the current year as well as deferred taxes.
The irregular section includes items which are not expected to recur. These items are reported '''''net of taxes'''''. The most common item in this category is '''discontinued operations'''. A discontinued operation is one where the company either has stopped doing business, or has announced plans to do so. This can mean either a line of business (e.g. a company that customizes and maintains aircraft decides to get out of maintaining aircraft) or a geographical area (e.g. a grocery chain decides to exit the Dallas-Fort Worth market, but continue operations in other parts of the country).