Accounting and Finance Foundations

Unit 7

Accounting and Finance Foundations Unit 7: Financial Statements 545

Financial Statements

Chapter 18

ABC Company

Income Statement

For the Year Ended

December 20XX

(in thousands of dollars)

Revenues

Sales $39,436

Less: Sales Return and Allowances 2,000

Total revenue $37,436

Expenses

Costs of goods sold

Beginning inventory, December 1 92,000

Purchases 19,480

Goods available for sale 111,480

Ending inventory, December 31 84,500

Cost of goods sold 26,980

Gross profit on sales 10,456

Operating Expenses

Salaries 2,000

Rent 1,800

Taxes 600

Utilities 550

Advertising 950

Depreciation of equipment 840

Other expenses 416

Total operating expenses 7,156

Net income $3,300

TIPS!

1. Single vs. Double Underline
   One way of distinguishing totals and subtotals on financial statements is by the type of underline
   used. A single underline may indicate the result of addition or subtraction that is a subtotal. The
   double underline indicates the result of addition or subtraction that is a grand total.


2. When are dollar signs appropriate?
   Writing a dollar sign for every monetary amount makes the financial statement more difficult to
   read. Ordinarily, dollar signs are included for the first amount in a list of values and for the totals.
   Even subtotals generally do not include the dollar sign. Another advantage of this convention is
   that it makes totals easier to locate.

The Income Statement Lesson 18.1 (cont’d)

Student Guide