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What is an income statement? In an income statement, what does "Sales mean". what does "cost...

  1. What is an income statement?
  2. In an income statement, what does "Sales mean".
  3. what does "cost of goods mean"?
  4. what are "operating expenses'' in the income statement - give an example
  5. in the income statement , what does "Net Income" mean?
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Answer #1

The income statement is a financial statement prepared for the period (usually one year, from 1st April to 31st of March).

It shows the profit and loss of the business. That is its revenues and expenses for the period.

Sales mean the total sales during the period including the Credit Sales + Cash sales. It is the amount received from selling the products/services of the business.


COST OF GOODS SOLD = It the cost associated with producing the product.

COGS = Sales - Gross Profit.


Operating expenses means the expenses incurred for the daily activities of the business like employees salary, electricity bill etc.


Net income = Total Revenues - Total Costs.


It is the amount remaining after all the expenses are paid like operating expenses, interest, tax, preference dividend etc.

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