The purpose of an income statement is to summarize the results of operations during an accounting period. The income statement shows the sources of revenue, types of expenses, and the amount of the net income or net loss for the period. There are two forms of the Income Statement. The difference, which is either net income or net loss, is then calculated. Multiple Step Used for merchandising businesses.
Gross sales is shown first, less sales returns and allowances and sales discounts.
This difference is called net sales. Cost of goods sold is subtracted next to arrive at gross profit. Operating expenses are then listed and subtracted from the gross profit to compute income from operations. Operating Expenses Directly associated with providing the primary goods and services of the business. Other revenues could include interest and rental revenues, and other expenses could include interest expense.