22.4.3 Financial reports A business owner will want to know how much money they are earning. Importantly they will want to know if they are making a profit or a loss. Is there enough cash coming in to ensure that the owner can pay the business costs on time? The bookkeeping software can make use of the entries in the journals and provide the business owner with the information they need in different types of reports. Two of these are the income statement and the cash flow statement . Income statement An income statement shows a business’s profit over a period. It includes the following: Sales revenue : Money earned from selling goods and services Cost of goods sold : Costs of materials used to generate sales (e.g. milk, coffee beans, sugar) Operating expenses : Costs to run the business (e.g. wages, gas, electricity)
FIGURE5 An income statement for a cafe
Café
Income statement for the week ended 9 January 2022
Revenue
$
$
$
Cash sales
2970.00
EFTPOS sales
4720.00
Soft drink sales
100.00
7190.00
Less Cost of goods sold
Groceries
1220.00
Bread
1000.00
Less Bread refunds
210.00
790.00
2010.00
Gross profit
5180.00
Less Expenses
Wages
600.00
Utilities
490.00
1090.00
4090.00
Net profit
To calculate profit, the first step is to subtract the cost of materials used from the total sales revenue. This figure will give a business owner a figure for gross profit. The operating expenses can then be subtracted from gross profit to provide a figure for net profit. Gross profit = sales revenue − cost of the materials Net profit = gross profit − operating expenses The total of all sales revenue was $7190.00. To calculate the cost of goods sold, the money paid for groceries and bread (as shown in the cash payments journal) had to be added, although the actual cost of the bread was reduced by the amount of the refunds, as shown in the cash receipts journal. This cost of goods sold was then subtracted from the revenue figure to give the gross profit. Subtracting the total of the operating expenses from the gross profit gives a final figure for net profit. In this case, the business has made a good profit of $4090 this week.
640 Jacaranda Humanities Alive 8 Victorian Curriculum Third Edition
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