The five key lines that make up an income statement are:
- Sales or Revenue: The total amount of money taken in from selling the business’s products or services. You calculate this amount by totaling all the sales or revenue accounts. The top line of the income statement will be either sales or revenues; either is okay.
- Cost of Goods Sold: How much was spent in order to buy or make the goods or services that were sold during the accounting period in review.
- Gross Profit: How much a business made before taking into account operations expenses; calculated by subtracting the Cost of Goods Sold from the Sales or Revenue.
- Operating Expenses: How much was spent on operating the business; qualifying expenses include administrative fees, salaries, advertising, utilities, and other operations expenses. You add all your expenses accounts on your income statement to get this total.
- Net Income or Loss: Whether or not the business made a profit or loss during the accounting period in review; calculated by subtracting total expenses from Gross Profit.
