Accounting for Managers

Financial Statements
51
Account Names
Sales Revenue
Cost of Sales
Materials
Labor
Overhead
Account Sums
575,000
825,000
350,000
Aggregated Sums
and Totals
3,500,000
1,750,000
Gross Margin
1,750,000
Operating Expense
Selling
General and
Administrative
Depreciation and
Amortization
750,000
650,000
100,000
1,500,000
Operating Income
250,000
Other Income and
Expenses
Dividends and Interest
Interest Expense
Unusual/Extraordinary
Items
25,000
(75,000)
150,000
100,000
Income Before Tax
350,000
Income Tax (t = .34)
119,000
Net Income
231,000
Income Statement
General Widget, Inc.
December 31, 200_
Table 3-2. Income statement
Webster03.qxd 8/29/2003 5:32 PM Page 51

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aggregated category sums so the information is presented as
clearly as possible. One of the few constants is that it will
always show the company name, the type of statement, and the
period being reported.
In this example, perhaps a small set design company, the
Sales Revenue, the top line, is the money received from cus-
tomers for the product. There are direct manufacturing costs
involved and company records expenses for the raw material,
the labor of the people who build the sets, and the overhead
associated with manufacture. This overhead might be the shop
where construction takes place as well as utility, insurance, and
other costs associated with the defined work. Subtract these
costs from Revenue to yield the Gross Margin.
Since this income statement calculates a Cost of Sales,
General Widget (GW) provides a product. If GW were a service
company, these costs would not appear. There are