Statement (also known as Profit and loss statements) are used as a tool to
review your income less expense (to earn that income) for the current year.
Income (revenue) are the earnings of a business from goods &
services. This is normally a credit balance e.g. items sold.
Expenses are goods and services which are used in the business to
produce the income eg office supplies and utilities. This is normally recorded as a debit balance in the
Cost Of Goods Sold
Cost of goods sold - are the goods purchased for uses or resale in
the business. such as items may be used for example in the building of a machine.
Operating Profit - is the profit earned from the items less the direct expense
relating to building the item.
Statements (Profit and Loss statements) are used to review how
the business is performance is going over a set period of time (normally at the end of financial year) and to
see what expenses have been incurred during that period. These are also undertaken in order to determine
which expenses are high in comparison to income. By doing this review, a business can look at alternative way
to decrease its expenses and increase its income so that would be more profitable & more efficient. Once
the Income statement is done the profit or loss of the statement goes in the Balance Sheet under the equity
As example of a typical Income Statement (profit and loss) is as follows:
Income statements for the period ending 30 June 20XX
Cost of Goods Sold