Question

Which of the following are reported on the income statement? (Check all that apply.)

a. Inventory
b. Goods Available to Sell
c. Cost of Goods Sold
d. Sales Revenue
e. Gross Profit

Answer 1

The income statement includes Cost of Goods Sold, Sales Revenue, and Gross Profit. Inventory and Goods Available to Sell are not reported on the income statement. To calculate a firm's accounting profit, subtract the total costs from the Sales Revenue.

Step-by-step explanation:

The items that are reported on the income statement include:

• Cost of Goods Sold (c): This represents the direct costs attributable to the production of the goods sold by a company.
• Sales Revenue (d): This is the income received by a company from its sales of goods or the provision of services.
• Gross Profit (e): This is calculated as Sales Revenue minus Cost of Goods Sold and represents the profit a company makes after accounting for the costs associated to the production of the goods sold.

Inventory (a) and Goods Available to Sell (b), while important to understanding a company's financials, are not reported on the income statement. Inventory is reported on the balance sheet, and Goods Available to Sell may be a calculated figure not specifically presented in financial statements. The firm's accounting profit can be computed by subtracting the total costs (labor, capital, and materials) from the Sales Revenue. If a firm had sales revenue of $1 million last year and spent $600,000 on labor, $150,000 on capital, and $200,000 on materials, the firm's accounting profit would be $50,000.