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Income statement
This document reports some of the main items and margins reported into the income statement. Therefore, it should not be considered as an exhaustive and complete list.
REVENUES & GAINS
Income is increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants (IASB Framework). It includes revenues and gains. Revenue arises in the course of the ordinary activities of an entity and is referred to by a variety of different names including sales, fees, royalties, etc. The sales of tourism package is an ordinary activity that generates revenues for a travel agency. Gains represent other items that meet the definition of income but are not related to the ordinary activities of an organization.
Other incomes consist of income earned from activities that are not related to the firm's main business. For example, other income of an airline company may include: gain on disposal of fixed assets, interest income on bank deposits, exchange gain on translation of a foreign currency bank account.
Inventory represents the amount of the costs of products awaiting to be sold on the market. The inventory of a product includes the cost of its raw materials, work-in-process, and finished goods that means all costs necessary to acquire the inputs and transform them into products ready for sale.
EXPENSES & LOSSES
Expenses are the costs incurred to generate revenues, so they are related to the ordinary activity of a company or to its financial activities.
Losses are items that generate a decrease in the economic benefit of an entity but are not related to the ordinary activities , Losses can result from a number of activities such as; sale of an asset for less than its carrying amount, the write-down of assets, or a loss from lawsuits.
Cost of sales represents the cost of goods sold or services rendered during an accounting period. For a retailer as a travel agency, cost of sales will be the sum of inventory at the start of the period and purchases during the period minus any closing inventory. In case of a manufacturer however, cost of sales will also include production costs such as the cost of direct labor, direct material consumption, etc.
Cost of personnel is the value of expenditures related to personnel, including wages, benefits, trainings (if any), and payroll taxes incurred by the organization, during the reporting period.
Distribution cost includes expenses incurred in delivering goods from the business premises to customers.
Rentals are expenses paid to use a resource belonging to others (a building, a land, a machine, a car, etc.)
Administrative expenses generally comprise of costs relating to the management and support functions within an organization that are not directly involved in the production and supply of goods and services offered by the firm (salary cost of executive management, legal and professional charges, etc.)
Other expenses is a residual category.
Finance charges usually comprise of interest expense on loans.
Income tax expense includes the current period's estimated tax charge, prior period tax adjustments (if any) and deferred tax expense (if any).
Extraordinary items could be positive (revenues and gains) or negative (expenses and losses). They are related to phenomena or events that are unusual in nature, not frequent in occurrence and unpredictable. An example could be damages produced by an hurricane.
MARGINS
Gross profit = revenues – costs of sales. It measures the core profitability of a company before overhead costs, that are operating expenses necessary to run a business, but are not related to a specific business activity.
EBITDAR (earnings before interests, taxes, depreciation, amortization and rentals) = operating margin that expands on EBITDA by adding an additional excluded item to give a better indication of financial performance. Rent is included in the measure when evaluating the financial performance of companies, such as casinos or restaurants, that have significant rental and lease expenses derived from business operations. In some cases, the “R” stands for “Restructuring” rather than rents. In both the cases, by excluding these expenses, it is easier to compare one company to another and get a clearer picture of their operational performance.
EBITDA (earnings before interests, taxes, depreciation and amortization) = is an indicator to measure the value of a firm based on its net earnings before non-cash expenses (depreciation & amortization) are recorded. It is used to analyze and compare profitability between companies and industries because it eliminates the effects of investing decisions.
EBIT (earnings before interests and taxes) = an indicator of a company's operating profitability, calculated as revenue minus operating expenses, excluding tax and interest. EBIT is also referred to as "operating earnings", "operating profit" and "operating income”.
Profit before tax (PBT) = Gross margin minus all these costs =, which is a profitability measure that looks at a company profits before it has to pay income tax.
Net income is the overall net economic performance of the firm. Often referred to as "the bottom line" since net income is listed at the bottom of the income statement, it measures a company's total earnings (or profit), that is how profitable the company is over a period of time.
