Income Statement By Function Depreciation

An income statement by nature method is the one in which expenses are disclosed according to their nature such as depreciation transports costs rent expense wages and salaries etc.

Income statement by function depreciation. The income statement reports all the revenues costs of goods sold and expenses for a firm. The following example shows the format of an income statement by function of expense. Depreciation of the equipment and building used in the manufacturer s selling and general administrative functions. It is accounted for when companies record the loss in value of their fixed assets through depreciation.

This expense is most common in firms with copious amounts of fixed assets. Depreciation is a non cash expense and serves as a tax shelter so it is shown on the income statement. Or a nonprofit entity that reports expenses by function could do so by aggregating its expenses into the following general functions. This depreciation will be reported on the manufacturer s income statement in the section containing its sg a expenses.

After subtracting selling and administrative expenses and depreciation you arrive at the operating profit. For example the depreciation on the sales staff motor van is considered part of the company s selling expense. The expenses in an income statement are either classified by their nature or by their function. One expense reported here relates to depreciation.

Examples of income statement line items that are presented by function are. In this research work titled the effect of depreciation on the income statement of with particular reference to united bank for africa uba plc. The effect of depreciation on income statement reporting a study of united bank for africa uba plc enugu branch abstract. The depreciation will be reported on the retailer s income statement in the section containing its sg a expenses.

The use of function method to disclose expenses still requires us to disclose the individual expenses by nature method under each function either on the face of the income statement or in the notes to the income statement. Depreciation can be a selling expense administration expense distribution costs and part of the cost of production. Physical assets such as machines equipment or vehicles degrade over time and reduce in value incrementally. Where depreciation is reported depends on the assets being depreciated.