Ashley is a finance executive. She has gathered all the data from different departments regarding the finances expended as well as earned in the process of selling a product. She needs to prepare an income statement. How should she start preparing the income statement?

The income statement always starts with total revenues. Then you start to subtract different items. A common income statement should follow this format:

To properly follow a format, we must start with the header: Company XYZ, Income Statement, December 31, Year 202X.

We must determine total revenue: we should add all the revenue items. Minus cost of goods sold. Gross profit = total revenues - COGS

Minus operating expenses: basically operating and administrative expenses. Earnings before interest and taxes (EBIT) = gross profit - operating income

Minus interest expenses. Minus income taxes.

Net income = EBIT - interests - taxes