Structure of the Income Statement

? GRADE 10 — Financial Statements Chapter 9: The Income Statement (Statement of Profit or Loss) The Income Statement answers one question: Did the business make money or lose money this year? It shows all income earned and all expenses paid, and the difference is either a net profit (income > expenses) or a net loss (expenses > income). Structure of the Income Statement Description Amount Sales / Revenue R120 000 Less: Cost of Sales (R72 000) = GROSS PROFIT R48 000 Less: Operating Expenses Salaries & Wages (R18 000) Rent Expense (R9 600) Water & Electricity (R2 400) Depreciation (R3 000) = OPERATING PROFIT R15 000 Add: Other Income (interest received) R800 Less: Finance Costs (interest on loan) (R1 200) = NET PROFIT FOR THE YEAR R14 600 Gross Profit vs Net Profit — What's the Difference? Gross Profit is the profit from buying and selling goods only. It ignores all running costs like salaries and rent. Net Profit is what is left AFTER paying all expenses. Net profit is the 'real' profit. Chapter 10: The Balance Sheet (Statement of Financial Position) While the Income Statement covers a period of time (e.g. the year ending 28 Feb), the Balance Sheet is a snapshot on one specific date. It shows everything the business owns (assets) and everything it owes (liabilities) on that exact day. ASSETS R Non-Current Assets R45 000 Fixed Assets (Equipment, Vehicles) R50 000 Less: Accumulated Depreciation (R5 000) Current Assets R32 000 Stock / Inventory R18 000 Debtors R9 000 Cash and Bank R5 000 TOTAL ASSETS R77 000 EQUITY AND LIABILITIES R Owner's Equity R52 000 Capital (at start of year) R45 000 Add: Net Profit for the year R14 600 Less: Drawings (R7 600) Non-Current Liabilities R15 000 Long-term Loan R15 000 Current Liabilities R10 000 Creditors R7 000 Bank Overdraft R3 000 TOTAL EQUITY AND LIABILITIES R77 000