Income Statement with Adjustments Format

Blank format

Begin with the three-line heading (business name, statement name, and 'for the year ended ...'), then set out the trading section followed by the profit and loss section; sub-items and adjustment workings (+/-) go in the inner columns and only the final figure is carried to the right-hand column.

Parts of the format

Three-line heading

First line the business name, second line 'Income Statement', third line the period 'for the year ended ...' because the statement covers a period, not a single date.

Trading section

Determines gross profit by deducting cost of sales (opening inventory + net purchases + carriage inwards − closing inventory) from net sales.

Income adjustments

Income such as discount received and bad debts recovered is added to gross profit on the accrual basis, i.e. what is earned for the period.

Expense adjustments

Expenses are adjusted by adding accrued amounts and deducting prepaid amounts so that only the current period's expense is charged.

Non-cash items

Depreciation, bad debts and provision for doubtful debts are expenses without a cash flow but are still charged in the statement on the accrual basis.

Net profit

The final line shows net profit (gross profit + income − total expenses), which is then transferred to the capital account in the Statement of Financial Position.

Filled example

Perniagaan Perabot Sri Murni (a sole proprietorship) closes its accounts on 31 December 2025. Sales RM180,000 (sales returns RM4,000), opening inventory RM20,000, purchases RM100,000 (purchases returns RM3,000), carriage inwards RM2,000 and closing inventory RM25,000; discount received RM1,500, bad debts recovered RM500; salaries paid RM24,000 (RM2,000 still accrued), rent paid RM12,000 (RM1,000 prepaid), depreciation of fittings RM4,000, bad debts RM1,000, provision for doubtful debts RM800 and general expenses RM3,200.

Common layout errors

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