O level, Poly, University, MBA Principles of Accounts Basic Concepts Notes - Income Statement

Introduction to Accounting 

Financial accounting is the preparation and presentation of financial statements to allow users to make economic decisions about the entity

Financial statements consist of

–Statement of cash flows

–Balance sheet

–Income statement

–Statement of changes in equity

Example of income statement:


Sales is what you get from selling your products or delivering your services. Cost of sales is the amount that is directly associated with the sales of products. For example, if you sold a car for $18,000 and it cost you $11,000 to get that car from a supplier --> sales will be $18,000 and cost of that sales will be $11,000. What is remaining will be your gross profit. After deducting the rest of the expenses such as rental for the warehouse to sell the car and wages of your sales man, you will be left with your net profit. 

The next blog will look at balance sheet.  

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