A business keeps various types of financial records to monitor its performance and ensure that taxes are paid. These include income statements and statements of financial position.
An income statement shows the business' financial performance over a given time period e.g. one year.
Income statement for Year Ended 31 March 2019 | ||
£0 | £0 | |
Sales revenue | £500,000 | |
Cost of sales | ||
Opening stock | £100,000 | |
Add purchases | £220,000 | |
£320,000 | ||
Less closing stock | £140,000 | |
£180,000 | ||
Gross profit | £320,000 | |
Less expenses | ||
Wages | £100,000 | |
Rents and rates | £50,000 | |
Advertising | £60,000 | |
£210,000 | ||
Profit for the year | £110,000 |
The income statement shows the business has made a gross profit of £320,000 before considering other expenses. It shows a net profit of £110,000 has been made.