Income Statement Excel Template
An income statement reports a company’s income, expenses and thus derives its profit generated for a specific period of time (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 any and all company’s reporting purposes, and this profit is used for further allocation of next year’s provisions and reserves and for payment of dividends to shareholders.
- Gross Revenue: This is the earning from Gross Sales 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 manufacture or development of a product is accounted for under this header.
- Gross Profit: Profit derived by deducting the Cost of Goods Sold from Gross Revenue.
- Operating Expenses: These operating expenses 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 Capex carried out during the year based on the useful life of the improvement, for 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, and 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. This is the starting point of the income statement template.
#2 – Cost of Goods Sold (B):
- Direct Costs associated with the manufacture/development of the product.
- Formula: (B) = Opening Stock (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. This 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 Taxes or Profit before Taxes or EBT (G):
- All Interest expenses required to be reported by the company are deducted from EBIT.
- Formula: (G) = (F) – Interest Expenses
- This is an important component of the income statement, since till 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 taxes gives actual profit from income and expenses.
#8 – Profit After Taxes or PAT (H):
- This 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.
The amount derived after calculation of PAT or Net Profit is further used for allocation of profits to reserves, dividend payouts and other provisions for the next year.
Relevance and Uses
- An important financial statement: The income statement is one of the most important financial statements which reports income generated by the company vis-à-vis the expenses it incurred in making such revenue.
- Analysis of performance by 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 performance of the company.
- 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 analysts 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 statement 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 reporting 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 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 –