Notes and activities on Income statement
Answer Activities and Questions
An income statement is prepared to show the Gross Profit/ Loss and Net Profit/ Loss of the business. There are 2 sections in an income statement:
Items used to prepare Trading section
Sales (Revenue)
Opening inventory
Closing inventory
Purchases
Items used to prepare Profit and Loss section
Examples of Expenses
Wages and salaries | Insurance | Communication expenses |
Rent and rates | Advertising | Selling expenses |
Power, light and heat / electricity | Warehouse wages | Marketing expenses |
Discount allowed | Commission on sales | Commission paid |
Administrative expenses | Office expenses | Interest received |
Distribution cost | Postage and Stationery | Motor van running expenses |
Carriage outwards (on sales) | Motor van expenses | General /sundry expenses |
Income statement for the year ended 31st December 2016 | ||
$ | $ | |
Sales / Revenue | **** | |
Less cost of sales: | ||
Opening inventory | **** | |
Add Purchases | *** | |
Less Closing inventory | (****) | |
Cost of sales | (****) | |
Gross Profit | **** | |
Less expenses: | ||
Wages and salaries | *** | |
Rent and rates / insurance / advertising | *** | |
General / administrative / sundry expenses | *** | |
Total expenses | (***) | |
Profit for the year | **** | |
Q1 – Prepare an Income statement for the year ended 31st December 2000 | |
$ | |
Sales (Revenue) | 139 500 |
Purchases | 69 000 |
Wages and salaries | 3 250 |
Rent and rates | 3 150 |
Advertising | 1 550 |
Inventory - 1st Jan | 15 250 |
Inventory - 31st Dec | 14 450 |
Stationery | 950 |
Motor van expenses | 550 |
Electricity | 250 |
Insurance | 750 |
Q2 – Prepare an Income statement for the year ended 31st December 2001 | |
$ | |
Sales (Revenue) | 148 000 |
Purchases | 99000 |
Interest paid | 1200 |
Warehouse wages | 4200 |
Rent and rates | 3300 |
Insurance | 1600 |
Inventory - 1st Jan | 11 200 |
Inventory - 31st Dec | 13 450 |
Sundry expenses | 150 |
Distribution cost | 130 |
Administrative expenses | 170 |
Q3 – Prepare an Income statement for the year ended 31st December 2002 | |
$ | |
Inventory - 1st Jan | 3 750 |
Inventory - 31st Dec | 4 500 |
Wages and salaries | 1 800 |
Sales (Revenue) | 49 000 |
Purchases | 12 000 |
Rent and rates | 240 |
Advertising | 360 |
Office expenses | 120 |
General expenses | 180 |
Q4 – Prepare an Income statement for the year ended 31st December 2003 | |
$ | |
Inventory - 1st Jan | 1 990 |
Inventory - 31st Dec | 2 110 |
Commission Paid | 3 255 |
Interest on loan | 125 |
Sales (Revenue) | 32 300 |
Purchases | 13 400 |
Light and Heat | 990 |
Marketing expenses | 110 |
Communication expenses | 140 |
Selling expenses | 250 |
