Income Statements

Video Transcript

Welcome to income statements. Learning how to calculate an income statement will help you plan the future of your business. In this course, you will learn what is an income statement, what are revenues, what are expenses, And how to calculate profit? Let's say you own a grocery store. Your store has been so successful that now you're thinking about opening a business account with your local bank.

To do this, you'll need to prepare an income statement. But what exactly is an income statement? An income statement shows the profits or losses of a business over a period of time. They help you monitor a business's financial growth and loss over time. This makes it possible to plan for the future of your business, so it's essential to learn.

It's easy to calculate an income statement. All you have to do is apply the equation income equals revenue minus expenses. Let's help you explore each element of this equation, revenue, expenses, and income. Let's start with revenue. Revenue is money earned from the sale of goods or services.

Revenue also includes income earned from financial activities, like investment gains or interest from a business bank deposit. Revenue would be the amount you earn from the sale of groceries over the last year minus deductions. It's usually presented as sales minus sales discounts, returns, and allowances, which are deductions from your total revenue. Deductions are goods which have been returned or reductions in the selling price of items. After you consider these deductions, you'll know exactly what your revenue is.

Now let's talk about expenses. Expenses are the total cost of goods sold, selling costs, and general administrative costs. So what are your expenses? Well, to run a grocery store, you must buy the raw materials for goods you want to sell. You must pay your employee, your rent, water, and electricity.

You must make enough each month to meet the cost of these expenses in order to keep your store running. Now let's talk about expenses. Expenses are the total cost of goods sold, selling costs, and general administrative costs. So what are your expenses? Well, to run a grocery store, you must buy the raw materials for goods you want to sell.

You must pay your employee, your rent, water, and electricity. You must make enough each month to meet the cost of these expenses in order to keep your store running.