Easy-to-follow video tutorials help you learn software, creative, and business skills.Become a member

Introducing the income statement

From: Excel 2007: Creating Business Budgets

Video: Introducing the income statement

The financial document public companies use to report their income and expenditures is called an income statement. In a way it's the most disappointing of the financial documents, because it usually doesn't go into much detail. I'll go into more detail when I discuss how to create an income statement you can use it in the budgeting process, but let's take a look at the sample income statement for a fictitious company. The top line is Revenue. This is the amount of money that the company has made through sales, either of goods, services, or both. Then you get your operating expenses, what did it cost you to make that money.

Introducing the income statement

The financial document public companies use to report their income and expenditures is called an income statement. In a way it's the most disappointing of the financial documents, because it usually doesn't go into much detail. I'll go into more detail when I discuss how to create an income statement you can use it in the budgeting process, but let's take a look at the sample income statement for a fictitious company. The top line is Revenue. This is the amount of money that the company has made through sales, either of goods, services, or both. Then you get your operating expenses, what did it cost you to make that money.

So you have cost of revenue, which can include the cost of goods sold. In other words, how much did it cost you to make what it is that you're selling? Inventory costs, such as storage, warehouse rental, and so on, and then also any sales or volume discount that you've provided to your vendors. Companies will often offer a premium to other companies that buy their products if they buy in a certain quantity. You can include those volume discounts as part of your cost of revenue. Then you've other expenses including research and development.

What are you spending to move into new areas or create new products? Sales and marketing. Self-explanatory, and your general and administrative overhead. In other words, what does it cost to run and administer your business? When you add everything up, you have your total operating expenses. Then when you subtract your operating expenses from your revenue, you get your operating tncome. Now you need to include your other forms of income. In this case the company doesn't have any investments, which means that its income before income taxes is exactly the same as this operating income.

Again, expenses subtracted from revenue. Then you have your expected income tax bill, which will be $29,000, and you have your net income, the bottom line. You can learn a lot about a company by combining these numbers in what are called ratios. I described ratio analysis in my other course, Excel 2007: Financial Analysis. In this case, I'll just indicate that the company's net income has increased by about 100% over the past year, from $47,000 to $86,000.

All that analysis tells you a lot about the company and the way they're generating their income. The income statement offers the broadest possible view of a company's income and expenditures. If you're preparing a budget you'll need a more detailed picture to make accurate projections. I'll show you how to do that later.

Show transcript

This video is part of

Image for Excel 2007: Creating Business Budgets
Excel 2007: Creating Business Budgets

22 video lessons · 9795 viewers

Curt Frye
Author

 

Start learning today

Get unlimited access to all courses for just $25/month.

Become a member
Sometimes @lynda teaches me how to use a program and sometimes Lynda.com changes my life forever. @JosefShutter
@lynda lynda.com is an absolute life saver when it comes to learning todays software. Definitely recommend it! #higherlearning @Michael_Caraway
@lynda The best thing online! Your database of courses is great! To the mark and very helpful. Thanks! @ru22more
Got to create something yesterday I never thought I could do. #thanks @lynda @Ngventurella
I really do love @lynda as a learning platform. Never stop learning and developing, it’s probably our greatest gift as a species! @soundslikedavid
@lynda just subscribed to lynda.com all I can say its brilliant join now trust me @ButchSamurai
@lynda is an awesome resource. The membership is priceless if you take advantage of it. @diabetic_techie
One of the best decision I made this year. Buy a 1yr subscription to @lynda @cybercaptive
guys lynda.com (@lynda) is the best. So far I’ve learned Java, principles of OO programming, and now learning about MS project @lucasmitchell
Signed back up to @lynda dot com. I’ve missed it!! Proper geeking out right now! #timetolearn #geek @JayGodbold
Share a link to this course

What are exercise files?

Exercise files are the same files the author uses in the course. Save time by downloading the author's files instead of setting up your own files, and learn by following along with the instructor.

Can I take this course without the exercise files?

Yes! If you decide you would like the exercise files later, you can upgrade to a premium account any time.

Become a member Download sample files See plans and pricing

Please wait... please wait ...
Upgrade to get access to exercise files.

Exercise files video

How to use exercise files.

Learn by watching, listening, and doing, Exercise files are the same files the author uses in the course, so you can download them and follow along Premium memberships include access to all exercise files in the library.


Exercise files

Exercise files video

How to use exercise files.

For additional information on downloading and using exercise files, watch our instructional video or read the instructions in the FAQ.

This course includes free exercise files, so you can practice while you watch the course. To access all the exercise files in our library, become a Premium Member.

Join now "Already a member? Log in

Are you sure you want to mark all the videos in this course as unwatched?

This will not affect your course history, your reports, or your certificates of completion for this course.


Mark all as unwatched Cancel

Congratulations

You have completed Excel 2007: Creating Business Budgets.

Return to your organization's learning portal to continue training, or close this page.


OK
Become a member to add this course to a playlist

Join today and get unlimited access to the entire library of video courses—and create as many playlists as you like.

Get started

Already a member?

Become a member to like this course.

Join today and get unlimited access to the entire library of video courses.

Get started

Already a member?

Exercise files

Learn by watching, listening, and doing! Exercise files are the same files the author uses in the course, so you can download them and follow along. Exercise files are available with all Premium memberships. Learn more

Get started

Already a Premium member?

Exercise files video

How to use exercise files.

Ask a question

Thanks for contacting us.
You’ll hear from our Customer Service team within 24 hours.

Please enter the text shown below:

The classic layout automatically defaults to the latest Flash Player.

To choose a different player, hold the cursor over your name at the top right of any lynda.com page and choose Site preferencesfrom the dropdown menu.

Continue to classic layout Stay on new layout
Exercise files

Access exercise files from a button right under the course name.

Mark videos as unwatched

Remove icons showing you already watched videos if you want to start over.

Control your viewing experience

Make the video wide, narrow, full-screen, or pop the player out of the page into its own window.

Interactive transcripts

Click on text in the transcript to jump to that spot in the video. As the video plays, the relevant spot in the transcript will be highlighted.

Are you sure you want to delete this note?

No

Your file was successfully uploaded.

Thanks for signing up.

We’ll send you a confirmation email shortly.


Sign up and receive emails about lynda.com and our online training library:

Here’s our privacy policy with more details about how we handle your information.

Keep up with news, tips, and latest courses with emails from lynda.com.

Sign up and receive emails about lynda.com and our online training library:

Here’s our privacy policy with more details about how we handle your information.

   
submit Lightbox submit clicked
Terms and conditions of use

We've updated our terms and conditions (now called terms of service).Go
Review and accept our updated terms of service.