Income Statement

For the Year Ended December 31, 200…

Revenues Gross sales Less: Returns and allowances Less: Discounts NET SALES Cost of Goods Sold Beginning inventory Purchases for the year Less: Purchase discounts Net purchases Cost of goods available for sale Less: Ending inventory COST OF GOODS SOLD Gross Profit Operating Expenses Selling expenses Wages Advertising Store supplies Payroll taxes Rent Repairs and maintenance Auto and truck Insurance Utilities Depreciation and amortization Miscellaneous TOTAL SELLING EXPENSES General expenses Professional services Office supplies Miscellaneous TOTAL GENERAL EXPENSES TOTAL OPERATING EXPENSES OPERATING INCOME Other Income and Expenses Interest expense Interest income TOTAL INCOME AND EXPENSES INCOME BEFORE TAXES INCOME TAXES NET INCOME

$198,267 ___5,300 $101,700 18,075 24,016 10,170 31,142 7,418 11,697 4,068 8,700 13,245 ____400 $ 3,916 1,354 ____300

$478,293 3,079 ___1,200 $ 10,473 192,967 $203,440 __12,685 $230,631 ___5,570 $ 4750 ___(986)

$474,014 _190,755 $283,259 236,201 $ 47,058 ___3,764 $ 43,294 ___6,494 $ 36,800

2. Answer the following questions on the text and figures.

1. Whose duty is it to prepare financial statements? 2. What statements are the most important? 3. Why is the balance sheet referred to as “a snapshot” of a company’s financial position? 4. Why is this statement called ‘a balance’? 5. How often is the balance sheet commonly prepared? 6. Study Figure 1 and say: 6.1. What are the main sections on a balance sheet? 6.2. What do current assets include? 6.3. What entries are listed under “intangible assets”? 6.4. What belongs to “current liabilities”? 7. Why is the income statement known as “a movie”? 8. What indicators are summarized in the income statement? 9. Examine Figure 2 and say: 9.1.What do operating expenses include? 9.2. What did total selling expenses amount to? 9.3. What does the bottom line on this statement show?

Text 4

1. Before you read the text discuss with your partner what you know about auditing and try to guess why this activity is named “auditing”.

2. Read the text and check if your guess was correct.