ABSTRACT
This chapter explains the income statement with simple examples. The income statement is a summary of the income and expenditure for a given period. It summarises the trading between two balance sheet dates and therefore is not a statement as at a particular date. There are three main sections to an income statement: Trading Account, Overheads, Other Costs and Income. For accounting purposes, a sale is normally executed when your company has supplied its part of the contract, whether goods or services. This means that an invoice can be sent to the customer, and this invoice becomes the sale in the accounting system. The example of Argonaut Ltd Company introduces Depreciation. The problem with depreciation is that it is not actually paid to anybody. It is a notional cost, by which is meant that no cash changes hands. Depreciation is that portion of value of a fixed asset, such as machine, that has been consumed during the time period.
