The income statement

The income statement as a film of the year: expenses and revenue, operating, financial and exceptional results, and the gap between profit and cash.

The outline, topic by topic

Each topic is weighted the way the exam weighs it.

Expense: what is it?
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A reduction of the company's wealth tied to a period's activity: consumption of goods or services, wages, taxes, depreciation charges.
An expense belongs to the year in which the good or service is consumed, not the one in which it is paid.
A service is invoiced on 28 December and paid on 15 January. In which year is it revenue?
- The December year, the invoicing date
- The January year, the collection date
- Half in each year
- In neither, until the customer has confirmed receipt
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The December year, the invoicing date
Revenue is earned once the service is performed and invoiced. The January collection only affects cash: December's customer receivable turns into bank money.
The result for the year equals … minus ….
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The result for the year equals revenue minus expenses.
Positive, it is a profit; negative, a loss. Purchases of fixed assets are not in it: only their depreciation charge is an expense.
Revenue: what is it?
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An increase in the company's wealth tied to a period's activity: sales, services, grants, interest received.
A sale invoiced in December and paid in February is revenue of the December year: it arises at invoicing, not at collection.