Prepare the format of income statement and explain its elements.
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Vertical Form of Income Statement
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Particulars |
Current Year |
Previous Year |
Absolute Change Increase or Decrease |
% Change |
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Net Sales |
**** |
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Less: Cost of Goods Sold |
*** |
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Gross Profit |
**** |
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Less: Operating Expenses |
*** |
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Net Operating Profit |
**** |
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Add: Non Operating Income |
*** |
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Less: Non Operating Expenses |
*** |
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Profit before Interest and Tax |
**** |
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Less: Interest |
*** |
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Profit before Tax |
**** |
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Less: Provision for Tax/Tax Paid |
*** |
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Net Profit |
**** |
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Elements of Income Statement:-
1. Net Sales- Net Sales are derived as:
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Cash Sales |
*** |
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Add: Credit Sales |
*** |
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Gross Sales |
*** |
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Less: Sales Return |
*** |
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Net Sales |
*** |
2. Cost of Goods Sold- It is derived as:
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Opening Stock |
*** |
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Add: Purchases |
*** |
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Add: Wages |
*** |
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Add: Manufacturing Expenses |
*** |
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Add: Any other direct Expenses |
*** |
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Closing Stocks |
*** |
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Cost of Goods sold |
*** |
3. Operating Expenses- It is derived as:
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Administrative Expenses |
*** |
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Add: Selling Expenses |
*** |
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Add: Distribution Expenses |
*** |
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Add: Depreciation |
*** |
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*** |