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Income Statement format

Many businesses tend to ignore the income statement format when they want to know how well their finances are doing. This is a mistake and it can cause you many problems later on. The format of your income statement is very important.

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Statements are made up of information that is used for reporting. This information has to be either presented in terms of an equation or a pie chart. When presenting these statements, you have to always remember that there is a hierarchy and the first level down is the financial information that is used to report the company’s performance.

Some people think that the calculations for the income statement format would be the total of all the individual income and the gross monthly income of each person, but this is not the case. For instance, there will be a gross monthly income, which includes any money that your boss receives from his salary, commission or another type of payment from your employer. Also included in the gross monthly income is any money that your spouse earns from his job, his part-time employment or from his own business.

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There will also be deductions from the gross monthly income. If you take a deduction for mortgage interest or any other kind of deduction for taxes, then these are considered to be part of the gross income of each person. If your company deduct other expenses such as car expenses, food expenses, grocery bills, medical expenses, etc., then these are also part of the gross income.

The statement would then have to sum up all the amount that is used to calculate the income of the company. A simple example is if you are selling products in a market and you receive one product for sale for twenty dollars, then the sum of the expenses for the product will include the costs for advertising, promotion, promotional materials, wholesale payments, labor cost, product costs and so on. There are also many other expenses that you will have to include when you make sales in this kind of situation. So, in essence, you need to compare your gross income to the amount that you will end up with by using the income statement format. This is why it is important to use a calculator to check if the sum of all the deductions and other expenses in the income statement is equal to the gross income. The calculator may have errors that could lead you to conclude that you are not as rich as you thought you were.

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