Preparing an income statment

Question 1

Cost of sales

Answer 1

• The expense incurred when inventory flows out of the business due to a sale
• It is determined by adding together the value of each sale in the OUT section of inventory card and subtracting the value of IN section of the inventory cards.
• ** When there is a sales return this has to be deducted from the cost of sales

Question 2

Cost of goods sold

Answer 2

The cost incurred with getting inventory in the condition and location ready to be sold
This includes:
- Cartage in
- Freight / delivery in
- Buying expense
- Packaging
- Shelf stacking wages
**Does not include**
- Anythign after the sale i.e. delivery fees

Question 3

What is the income statment and its template

Answer 3

- The accounting report that details the revenue earned and expenses incurred during the period
Template:
Revenue
Net sales
Less cost of goods sold
Gross profit
Less inventory loss
Adjusted gross profit
Less other expenses
Net profit