Learn how to understand Financial Statement of a company (with examples)

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Finance Management Course
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  • 12 lessons
  • 6 quizzes
  • 1 week duration

3.3 Income Statement Preparation

In the previous section, we took an example of sale of $100 smartphone at $200 and broken down the transaction into five key categories.

Given below are the last two breakage from the previous section:

– Fourth category is Revenue or Income. The sale increased the income of the company by $200. So you can write $200 in the revenue category in the Income statement.

– Fifth category is the Expenses and the cost of goods sold. In order to sell the product, company had to incur some expenses. It is $100 – cost of goods sold. But how? Because when company calculates cost of a product, it adds up all the smallest of the cost it incurs for the production of the product. So this value will be in the Expenses category of the Income Statement.

Now let us create an Income Statement from this detail.

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