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In this income statement tutorial, I explain the format of the income statement along with commonly used income statement accounts.
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Income statement tutorial
You will learn in this tutorial what an income statement or profit and loss statement looks like. We look at a real income statement of a company that sells toys. We start with explaining the period covered by an income statement, and then move on to currency and rounding.
The income statement tutorial then explain what is the meaning of net sales and how cost of sales is calculated. We understand that gross profit is the difference between net sales and cost of sales. We then take a look at operating expenses including selling, general and administrative expenses. We also understand with the help of an example what is depreciation and amortization and gain or loss on sale of properties.
In this income statement tutorial, we then understand how earnings are calculated and how interest and taxes are shown separately on an income statement.
By the end of this income statement you will understand exactly how it looks, the key accounts or line items used and their meanings and how to understand an income statement.