Answer:
Explanation:
Creating an income statement on a perpetual inventory system is similar to doing so on any other inventory system, but it relies on real-time tracking of inventory levels. Here's a basic outline of the steps:
Gather Information:
Start by gathering your financial data, including sales revenue, cost of goods sold (COGS), operating expenses, and any other relevant income or expense items.
Sales Revenue:
Calculate your total sales revenue. This includes all sales made during the period. In a perpetual inventory system, you have real-time information on sales.
Cost of Goods Sold (COGS):
Calculate the cost of goods sold. In a perpetual system, you have real-time data on inventory levels, so you can calculate the cost of goods sold as the cost of the beginning inventory plus the cost of purchases, minus the cost of ending inventory.
COGS = (Beginning Inventory + Purchases) - Ending Inventory
Gross Profit:
Subtract the COGS from the total sales revenue to find the gross profit.
Gross Profit = Sales Revenue - COGS
Operating Expenses:
List and calculate all operating expenses, such as salaries, rent, utilities, marketing expenses, etc.
Operating Income:
Subtract the total operating expenses from the gross profit to find the operating income (also known as operating profit or operating earnings).
Operating Income = Gross Profit - Operating Expenses
Other Income and Expenses:
Include any other income or expenses, such as interest income, interest expenses, and taxes.
Net Income:
Calculate the net income by subtracting other income and expenses from the operating income.
Net Income = Operating Income + Other Income - Other Expenses - Taxes
Format the Income Statement:
Format the income statement with the revenue section at the top, followed by the cost of goods sold, gross profit, operating expenses, operating income, other income and expenses, and the final net income figure.