Economics Part A

Income Statement Example - Simplified

An Income Statement example is presented in one column as shown in the following table.

The statement relates to the activity of the firm during a single year. The statement first presents all the firm’s revenues during that year, which is followed by all of the expenses during the year. 

In the given simplified income statement example:

The first line states the firm’s total revenues during the year.

The lines thereafter, present annual expense items, that are classified by their character.

The usual expense items are as follows:

1. Cost of sales, which includes

  • Raw materials.

  • Salaries of production employees.

  • Depreciation (wear and tear on machinery, equipment and buildings).

2. General and administrative expenses

3. Sales and marketing expenses

4. Financing expenses (interest)

5. Taxes

The expense lines are not presented consecutively. Almost every one of them is followed by an intermediate line listing the difference between total revenues and total expenses, up to and including the expense line above it. Each intermediate line has a short title ending with the word “profit”, for example: operating profit, gross profit, etc.

As seen below (income statement example - table 7.7) the bottom line is net profit. Unfortunately, sometimes this number is negative. In this case, its title changes to net loss, instead of net profit.

Table 7.7



Cost of Sales


Gross Profit (intermediate line)


General and Administrative Expenses


Sales and Marketing Expenses


Operating Profit (intermediate line)


Financing Expenses


Pre- Tax Profit




Net Profit


Income Statement Example - Simplified590Income Statement Example - Simplified