Income Statement Excel Template
An income statement reports a company’s income, expenses and thus derives its profit generated for a specific period (generally for a financial year). The attached excel template of an income statement is to be used for understanding how to calculate Net Profit from Gross Sales reported by a company. This Net Profit is important for all company’s reporting purposes, and this profit is used for further allocation of next year’s provisions and reserves and payment of dividends to shareholders.
- Gross Revenue: This is the earning from Gross SalesGross SalesGross Sales, also called Top-Line Sales of a Company, refers to the total sales amount earned over a given period, excluding returns, allowances, rebates, & any other discount. of the company. All expenses related to the sales are deducted after this starting point in the income statement.
- Cost of Goods Sold: All direct expenses in the manufacturing or development of a product are accounted for under this header.
- Gross Profit: Profit derived by deducting the Cost of Goods SoldCost Of Goods SoldThe cost of goods sold (COGS) is the cumulative total of direct costs incurred for the goods or services sold, including direct expenses like raw material, direct labour cost and other direct costs. However, it excludes all the indirect expenses incurred by the company. from Gross Revenue;
- Operating Expenses: These operating expensesOperating ExpensesOperating expense (OPEX) is the cost incurred in the normal course of business and does not include expenses directly related to product manufacturing or service delivery. Therefore, they are readily available in the income statement and help to determine the net profit. relate to indirect costs of the company’s product, which is being sold and whose revenue is generated as a part of the Gross Revenue.
- Operating Profit: Income derived after deducting Cost of Goods Sold and Operating Expenses from Gross Revenue.
- Amortization Expenses: This is the averaged out amount of any CapexCapexCapex or Capital Expenditure is the expense of the company's total purchases of assets during a given period determined by adding the net increase in factory, property, equipment, and depreciation expense during a fiscal year. carried out during the year based on the useful life of the improvement. E.g., replacement of the roof of the property, which is a capital expense, and the company may not want it to be reflected in the same year. Moreover, the use of such improvement is being made over a period of time, which is also called the useful life of such a new roof. Hence such a huge amount is divided into the same smaller amounts, which can be reflected in the income statement every year.
- Depreciation: Depreciation is an expense that is given a similar treatment as amortized expense. A fixed asset tends to deteriorate in value each year. Such a deteriorated amount is being accounted for in the income statement each year.
- Interest Expenses: Any interest expense that a company makes during the year for loans and advances.
- Tax: Commercial and industry-specific Taxes paid to the government (generally at 40%).
- Net Profit: This is the actual profit made by the company after all expense deductions.
Calculation of Income Statement Template Line Items
Given below is the calculation of each attribution of the income statement template.
#1 – Gross Revenue (A):
- Sales made by the company. It is the starting point of the income statement template.
#2 – Cost of Goods Sold (B):
- Direct CostsDirect CostsDirect costs are costs incurred by an organization while performing its core business activity and can be attributed directly in the production cost, such as raw material costs, wages paid to factory staff, power & fuel expenses in a factory, and so on, but do not include indirect costs such as advertisement costs, administrative costs, etc. associated with the manufacture/development of the product;
- Formula: (B) = Opening StockOpening StockOpening Stock is the initial quantity of goods held by an organization during the start of any financial year or accounting period. It is equal to the previous accounting period's closing stock, valued in accordance with appropriate accounting standards based on the nature of the business. (B1) + Direct Costs (B2) + WIP (B3) – Closing Stock (B4)
#3 – Gross Profit (C):
- Formula: (C) = Gross Revenue (A) – Cost of Goods Sold (B)
#4 – Operating Expenses (D):
- All indirect expenses related to the product(s)’ manufacture/development. It may be allocated to more than one product sold by the company depending upon the proportion of usage.
- Formula: (D) = Total Administrative Expenses (D1) + Total Selling Expenses (D2) + Other Indirect Expenses (D3)* Other Indirect Expenses can be elaborated further into sub-items depending upon items and reporting structure. These include Office Rent, Supervisor Salary, etc.
#5 – Net Operating Profit (E):
- Also called EBITDA (Earnings before Amortization, Depreciation, Interest, and Taxes)
- Formula: (E) = (C) – (D)
#6 – Earnings before Interest and Taxes or EBIT (F):
- All Amortized and Depreciation expenses required to be reported by the company are deducted from Operating Profit (or EBITDA).
- Formula: (F) = (E) – Amortized Expenses – Depreciation Expenses
#7 – Earnings before TaxesEarnings Before TaxesPretax income is a company's net earnings calculated after deducting all the expenses, including cash expenses like salary expense, interest expense, and non-cash expenses like depreciation and other charges from the total revenue generated before deducting the income tax expense. or Profit before Taxes or EBT (G):
- All Interest expenses required to be reported by the company are deducted from EBITEBITEarnings before interest and tax (EBIT) refers to the company's operating profit that is acquired after deducting all the expenses except the interest and tax expenses from the revenue. It denotes the organization's profit from business operations while excluding all taxes and costs of capital..
- Formula: (G) = (F) – Interest Expenses
- It is an important component of the income statement since, in the above calculation (EBT), the company’s internal expenses are being reported that are related to the product and its manufacture/development. Hence, profit before taxesProfit Before TaxesProfit before tax (PBT) is a line item in a company's income statement that measures profits earned after accounting for operating expenses like COGS, SG&A, depreciation & amortization, and non-operating expenses. It gives the overall profitability and performance of the company before making payments in corporate taxes. gives actual profit from income and expenses.
#8 – Profit After Taxes or PATProfit After Taxes Or PATProfit After Tax is the revenue left after deducting the business expenses and tax liabilities. This profit is reflected in the Profit & Loss statement of the business. (H):
- It is the Net Profit derived after deducting Taxes from EBT.
- Formula: (H) = (G) – Commercial Taxes
- All companies are required to pay certain % of income to the government in the form of Taxes. Hence this amount to be paid is added to all other expenses.Other Expenses.Other expenses comprise all the non-operating costs incurred for the supporting business operations. Such payments like rent, insurance and taxes have no direct connection with the mainstream business activities.
The amount derived after calculation of PAT or Net Profit is further used for the allocation of profits to reserves, dividend payouts, and other provisions for the next year.
Relevance and Uses
- Important financial statement: Income statement is one of the most important financial statementsImportant Financial StatementsFinancial statements are written reports prepared by a company's management to present the company's financial affairs over a given period (quarter, six monthly or yearly). These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all levels. and reports income generated by the company vis-à-vis the expenses incurred in making such revenue;
- Analysis of performance by the company: This statement reflects the total expenses made and income made at each level accordingly. Such income at different levels is also used in the analysis of various factors in the company’s performance.
- Future predictions: With all data correctly and accurately reported by the company, the company can make its decisions for future projects.
- Market Research: Such income statements reported by companies are also used by research analystsResearch AnalystsResearch analyst is a profession where the main task includes research on specific fields, analyzing the facts and figures, interpreting the analysis, and finally presenting the same to a structured audience that can relate to marketing, finance, operations. for making industry level and sector level reports, which are further used by industry experts. This type of research is helping to make development decisions as well.
The success of an income statementIncome StatementThe income statement is one of the company's financial reports that summarizes all of the company's revenues and expenses over time in order to determine the company's profit or loss and measure its business activity over time based on user requirements. depends on accurately reported statistics. However, it also depends on the right format used by the company to report the numbers. There are different formats approved by different financial reportingFinancial ReportingFinancial Reporting is the process of disclosing all the relevant financial information of a business for a particular accounting period. These reports are used by the stakeholders (investors, creditors/ bankers, public, regulatory agencies, and government) to make investing and other relevant decisions. institutions globally, and companies generally follow a particular institution (like US GAAP or IFRS for US entities or IAS for Indian companies). However, the same data can be reported interchangeably into other formats with the same output. Using the income statement excel template, one can derive the actual profit made by the company for the year and accordingly make decisions for future investments and/or provisions. Any update should be incorporated to create the next version of this template.
You can download this Template here – Income Statement Excel Template.
This article has been a guide to Income Statement Template. Here we discuss the Free Income Statement Excel Template along with step by step guide to calculate each line item. You can learn more about accounting from the following articles –