Income statement
In one sentenceA statement showing the business's revenues and expenses for a given period, in order from sales to gross profit, then operating profit, then net profit or loss.
Simply put
You read the income statement from top to bottom: it starts with sales, deducts their cost to reach gross profit, then deducts operating expenses to reach operating profit, then other items and Zakat or tax to reach net profit.
It covers a period (a month, a quarter or a year), unlike the statement of financial position, which captures a single day.
Worked example
A restaurant's annual sales were 1,200,000 SAR, the cost of materials was 480,000 SAR, and operating expenses (salaries, rent and electricity) were 540,000 SAR.
Sales1,200,000
− Cost of sales(480,000)
= Gross profit720,000
− Operating expenses(540,000)
Profit before Zakat = 720,000 − 540,000180,000 SAR
Formula: Sales − cost of sales − expenses = net profit
Don't confuse it with
Statement of financial positionThe income statement covers a period and measures performance, while the financial position is for one day and shows what the business owns and owes.
in FullScreen ERP
The final statements in the system include the trial balance, the income statement and the financial position. General accounts