How To Prepare A Traditional Income Statement

To prepare an income statement generate a trial balance report calculate your revenue determine the cost of goods sold calculate the gross margin include operating expenses calculate your income include income taxes calculate net income and lastly finalize your income statement with business details and the reporting period. Revenue block usually a one line aggregation of gross sales and a variety of sales discounts and allowances. Before you can prepare an income statement for your business you have to calculate net sales and cost of goods sold using information that appears on your worksheet.

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This statement contains several blocks of revenue and expense information which are organized as follows.

How to prepare a traditional income statement. This income statement looks at costs by dividing costs into product and period costs in order to complete this statement correctly make sure you understand product and period costs. Finding net sales net sales is a total of. The traditional income statement also called absorption costing income statement uses absorption costing to create the income statement. Then you can use the rest of the numbers from your worksheet to prepare your business s income statement.

A traditional income statement employs absorption costing to arrive at a profit or loss figure. Cost of goods sold block includes the cost of direct materials direct labor and.