Tips for Preparing Income Statements

Doing Business in Indonesia: Tips for Preparing Income Statements

An Income Statement is one of those 3 major Financial Reports to demonstrate the Financial Performance of a company. The remaining two are the Balance Sheet and Cash Flows.

Income Statement is also known as Profit and Loss (P&L). Some people also call it Statement of Revenue and Expense. However, they name it, its primary purpose is to reflect the Revenues and Expenses of a Company over a certain period of time.

Some Tips for Preparing Income Statements would make your life easier. We have it here for you.

 

Create a Template for your Income Statement

If you’re going to prepare Income Statements every now and then, better have a formulated template where you can simply enter the information you need to produce the document. A formulated Spreadsheet generates figures automatically.

The parts of an Income Statement include the Name of the Company, the name of the document, which is “Income Statement”, Period of Ended, Revenues, Expenses, and Profit. You can download an open spreadsheet that has all these parts or devise your own format.

 

Prepare the Trial Balance Ahead of Time Before you make an Income Statement

You must have a basis for your data to enter into the Income Statement. A Trial Balance would be a good document for this. It contains all the information you need in Preparing Income Statements.

 

Identify all the Entries for Revenue from your Trial Balance, then, get the sum

Revenue is the gross sales of the company. It’s the top of the line entry found in your Income Statement. It includes the fees that are earned from the sales of your products and services, rent revenue if you’re offering your office for events and customers pay for that, dividend revenue, interest revenue like those interest from company money you deposited in a bank, and contra revenue whenever there are sales return or sales discount.

Make an Indention by leaving the first Column blank on your Spreadsheet, then, enter the  Revenue Entries at the left part of the Income Statement right after the heading, on the second column. Leave the Third Column as this is where you will encode values for Expenses eventually. On the Fourth Column, enter the Corresponding Amount for each of your Revenue Entries. The First Entry should always have a Currency Sign.

On the last entry of the Revenue Entries, write “Total Revenue”, then, opposite to that, enter the total amount.

 

Identify all the Entries for Expenses from your Trial Balance, then, get the sum

Expenses are the amount of money you have to let go of keeping the operation of your business. It includes the expenses from the supplies and services you get from different providers, Sales Commissions Expense, Delivery Expense, Rent Expense, Salaries Expense, and Advertising Expense.

Right after the last entry of the Revenue Entries, type in “Less: Expenses”. After this, type all the Expense Entries with its corresponding amount on the opposite side.

On the last entry of the Expense Entries, write “Total Expense”, then, opposite to that, enter the total amount.

 

Compute the Profit

The last step in Preparing Income Statements is the computation of your profit. This is done by getting the difference between your Total Revenue and Total Expense.

The cell where the amount for Total Expense should be underlined. The cell where the amount for Profit, however, should be double underlined.

There are two possible scenarios for the output of your computation. When your answer bears a positive sign, it is called “Profit ”. However, if your answer is negative, you have a “Loss” status for your Financial Performance.

 

So, Now You’re Done with Preparing Income Statements, What’s Next?

The Accounting Cycle is a series of steps for the business to track transactions and consolidate financial information in a certain period of time. Preparing Income Statements is only a part of this. Together with Income Statements, you also need to prepare the balance sheet and cash flows, which are other topics that can be discussed at a later time.

If you’re having difficulty preparing your Income Statements and Accounting Cycle, We at 3E Accounting would like to help. We’re among those known Indonesia Financial Statement Compilation Services Provider that can offer you quality Accounting and Bookkeeping Services for your company.

We can’t wait to serve you. You can use the Contact Us information on this page to reach us.