Income Statement Notes

Learning Objectives

• Prepare and interpret an income statement using a trial balance.

• Identify accounts needed for an income statement.

• Recognize the two forms of income statement.

Income Statement Overview

• Provides financial results of business operations over a specific period.

• Reports if the business achieved profit/net income.

• Involves listing revenues, expenses, and calculating net income or loss.

Income Statement Calculation

• Formula:
  \text{Net Income/Net Loss} = \text{Total Revenues} - \text{Total Expenses}

Forms of Income Statement

• Natural Form (Single-step):

  • Groups all income and expenses together.

  • Example Calculation:

  • If Total Income > Total Expenses, results in Net Income.

  • If Total Income < Total Expenses, results in Net Loss.

• Functional Form (Multiple-step):

  • More detailed presentation with specific sections for income, costs, and expenses.

  • Cost of goods sold and expenses are subtracted in steps to find Net Income or Loss.

Real-world Application

• Example: Nine Media Corporation reported a net loss of Php 239.7 million in 2022.