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Provide the steps needed, and an example, for a Pro Forma income statement.

Question:

Provide the steps needed, and an example, for a Pro Forma income statement.

Income Statement:

Income Statement shows the results of the operations for the reporting period,m whether the company generated net income or incurred net loss. It is the reporting format for comparing revenues and expenses. Income statement only covers the temporary accounts used in recording of transactions such as revenue, sales, cost of goods sold and expenses.

Answer and Explanation:

Before preparing an income statement, you should first review the entries recorded in the journal and those forwarded in the ledger. classify those as to permanent and temporary accounts. The common temporary accounts, revenues and expenses, are those considered in the preparation of income statement. To start, put first then header by stating the company name, the name of the report (Income Statements), and the period covered. Once done. group all revenue accounts and expense accounts as well. Record revenue accounts on a per account basis , such as sales, rent income, interest income, and service revenue, and put add up to compute for the total revenues. Then, same process should be made with the costs and expenses. When the two total figures are obtained, deduct the total expenses from total revenues. The difference between these figures will result in either net income or losses.


ABC Company

Income Statement

For the Year Ended December 31, 2019


Sales 1,000,000
Service Revenues 500,000
Total 1,500,000
Cost of Goods Sold -800,000
Cost of Services -300,000
Administrative Expenses -200,000
Selling Expenses -100,000
Net Income 100,000

Learn more about this topic:

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Operations of an Income Statement

from Accounting 101: Financial Accounting

Chapter 8 / Lesson 5
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