Income statement for a retail business PDF

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Income statement for a retail business written assignment...

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1 Income Statement for A retail Business

Income Statement for A retail Business University of the people BUS1102-01 Basic Accounting-AY2022-T3 Mike James 16FEB 2022

2 Income Statement for A retail Business

An income statement helps retail businesses to measure the wellness of the business. The income statement helps a company to analyze its operating performance through the fiscal year. Understanding whether the revenue has increased or decreased will have an impact on the future decisions of the company. A retail store provides a small quantity of inventory which has a small margin includes “purchasing merchandise, paying for merchandise, storing inventory, selling merchandise, and collecting customer payments” If the sales are not recorded; there will not be any way to find out how well the business is doing. The income statement provides details of how much sales were reported, how much the expense was for the operating period and reports the total profit (loss). Franklin, M. Graybeal, P. & Cooper, D. (2020).

There are multi-step formats and simple formats to prepare an income statement. The multistep income statement has several steps and more detailed information than a simple income statement “The multi-step statement separates the cost of goods sold from operating expenses and deducts the cost of goods sold from net sales to obtain a gross margin.” “A simple income statement combines all revenues into one category, followed by all expenses, to produce net income”. Franklin, M. Graybeal, P. & Cooper, D. (2020). Which is all calculated together to get the net income. For a retail business, a multi-step format is advisable. Multi-steps format records a sales discount which is given for a pay earlier or who buys in bulk. Customers return their products due to a change of preference or for any other reason and the account will show debited to record. Different types of expenses are like Advertisement, sales, interest, salary, depreciation, office supply and insurance are all recorded in detail in the income statement. This allows us to see the wellness of the company and to decide.

3 Income Statement for A retail Business

Therefore, as an accountant, I advise the retail business to use the multi-step format to present the income statement for the management decision and external users. The management will have more detailed information to decide on each type of expense to cut down to make the business profitable or avoid the loss. Lenders could also be able to assess the risk of the business if they provide funds to the retail business. In general, I can say that the multi-step format is to provide more information about the financial performance of a company to the management, lenders, and investors.

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4 Income Statement for A retail Business

Reference Franklin, M. Graybeal, P. & Cooper, D. (2020). Principles of accounting, volume 1: Financial accounting. Open Stax Rice University. https://openstax.org/details/books/principles-financial-accounting...