Income Statement Format
The Income Statement is a financial statement that combines the Trading Account and the Profit and Loss Account into one vertical format to compute the gross profit and then the net profit of a sole proprietorship. It is prepared at the end of the financial period after revenue, expense and inventory accounts are closed, and it feeds directly into the Statement of Financial Position.
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Blank format
| Particulars | RM | RM | RM |
|---|---|---|---|
| Sales | XX | ||
| Less: Sales returns | XX | ||
| Net sales | XX | ||
| Less: Cost of sales | |||
| Opening inventory | XX | ||
| Purchases | XX | ||
| Less: Purchases returns | XX | ||
| Net purchases | XX | ||
| Add: Carriage inwards | XX | ||
| Cost of goods available for sale | XX | ||
| Less: Closing inventory | XX | ||
| Cost of sales | XX | ||
| Gross profit | XX | ||
| Add: Other income | |||
| Discount received | XX | ||
| XX | |||
| Less: Expenses | |||
| Salaries | XX | ||
| Rent | XX | ||
| Utilities | XX | ||
| Carriage outwards | XX | ||
| Total expenses | XX | ||
| Net profit | XX |
Vertical three money-column format; XX marks where a figure goes.
Begin with a three-line heading: business name, "Income Statement", and "for the year ended 31 December ...". Use the innermost money column for the purchases working, the middle column for sub-totals, and the outer column for gross profit and net profit; every item added or deducted is flagged with the word "Add" or "Less".
Parts of the format
- Three-line heading
- Business name, the statement type (Income Statement) and the period (for the year ended ...). A statement covers a period, so use "for the year ended", not "as at".
- Trading Account section
- Net sales minus cost of sales gives the gross profit. This is the first part of the statement.
- Cost of sales working
- Opening inventory + net purchases + carriage inwards = cost of goods available for sale, then deduct closing inventory. Carriage inwards belongs here, not among expenses.
- Profit and Loss section
- Gross profit plus other income (e.g. discount received) less all expenses gives the net profit.
- Stepped money columns
- Inner column for the purchases working, middle for sub-totals, outer for final results. Figures must align in the correct column.
- Net profit
- The final figure of the statement; it is carried to the owner's equity in the Statement of Financial Position.
Filled example
Sinar Jaya Furniture, owned by Puan Aminah, closes its accounts on 31 December 2024. Its records show sales RM150,000, sales returns RM2,000, opening inventory RM12,000, purchases RM90,000, purchases returns RM3,000, carriage inwards RM1,000, closing inventory RM15,000, discount received RM1,500, salaries RM20,000, rent RM8,000, utilities RM3,000 and carriage outwards RM1,500.
| Particulars | RM | RM | RM |
|---|---|---|---|
| Sales | 150,000 | ||
| Less: Sales returns | 2,000 | ||
| Net sales | 148,000 | ||
| Less: Cost of sales | |||
| Opening inventory | 12,000 | ||
| Purchases | 90,000 | ||
| Less: Purchases returns | 3,000 | ||
| Net purchases | 87,000 | ||
| Add: Carriage inwards | 1,000 | ||
| Cost of goods available for sale | 100,000 | ||
| Less: Closing inventory | 15,000 | ||
| Cost of sales | 85,000 | ||
| Gross profit | 63,000 | ||
| Add: Other income | |||
| Discount received | 1,500 | ||
| 64,500 | |||
| Less: Expenses | |||
| Salaries | 20,000 | ||
| Rent | 8,000 | ||
| Utilities | 3,000 | ||
| Carriage outwards | 1,500 | ||
| Total expenses | 32,500 | ||
| Net profit | 32,000 |
Gross profit RM63,000; net profit RM32,000.
Common layout errors
Related chapters and procedures
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