We are going to spend the next few posts reviewing what an income sheet is and how the income sheet will help you determine you shop rates.From Wikipedia the definition of income statement isIncome statement, also called profit and loss statement (P) and Statement of Operations, is a company's financial statement that indicates how the revenue (money received from the sale of products and services before expenses are taken out, also known as the "top line") is transformed into the net income (the result after all revenues and expenses have been accounted for, also known as the "bottom line").
The purpose of the income statement is to show managers and investors whether the company made or lost money during the period being reported.An income statement is the primary source of information which enables you to calculate your overhead absorption rates.
All expenses that you cannot attribute directly to the manufacturing of a product or service are included in overheads.Here are some common items and definitions of those items on the income statement.These items would not be used in the overhead absorption calculationNet Sales: amount of money made from the goods or the services that you sold.
The gross margin shows you how much money you have available to pay your expenses and still make a profit.Selling and Administrative Expenses: costs involved in getting the product or service ready to sell that are not directly related to the product itself.
It includes salaries for people not directly involved with the making of the product or performance of the service, advertising, office expenses, etc.
This reveals the amount your company has left over after paying it’s own costs to function as a business entity.Dividend and Interest Income: additional money that you receive from ownership and investments externally.