Test your knowledge of the trading profit and loss account with our online quiz.
Income Statement Basics
Manufacturing Account Format
The manufacturing account is a general ledger account used by a manufacturer to accumulate production costs such as direct materials, direct labor and manufacturing overheads. The account is used to calculate the manufacturing cost of goods completed during an accounting period.
Trading Profit and Loss Account
The trading and profit and loss accounts are temporary accounts in the general ledger. The trading account shows the gross profit and is particularly useful for a trading business which buys and sells finished products as it allows the gross profit and gross profit percentage to be calculated.
Quiz 50: Income Statement Quiz
Test your knowledge of bookkeeping with our online accounting and bookkeeping quiz.
Vertical analysis definition: A technique of analyzing financial statements by restating each line item (e.g. sales and marketing expenses) as a percentage of another base line item (e.g. Revenue). The horizontal analysis reports are not required by Accounting Standards, and are used more as a management tool rather than a formal reporting document.
Horizontal analysis definition: A technique of analyzing financial data by comparing one periods financial statements to another in order to spot trends in the information. The horizontal analysis reports are not required by Accounting Standards, and are used more as a management tool rather than a formal reporting document.
Income Statement Format
The income statement shows a business’s financial performance over a specified accounting period. It summarizes the income and expenses for the period resulting in either a net income or a net loss for the business.
The accounting period can be any length but for management account purposes is usually a month, and for legal financial reporting purposes is normally a year.
Multi Step Income Statement
The multi step income statement or multiple step income statement is an income statement which arrives at a net income figure in a series of steps including, for example, gross profit, and operating income. This is in contrast to a single step income statement which deducts the total expenses from the total revenues to arrive a net income figure in one single step.
EBITDA is the earnings a business has before interest, tax, depreciation, and amortisation, and is an indicator of operational profitability of the business.
Basic Profit and Loss Statement
The Basic Profit and Loss shows a business’s financial performance over an accounting period. The accounting period can be any length but is usually a month or a year.