# How to do income statement

## Choose a period for your income statement.

Income statements would ideally be generated on a monthly, quarterly, or annual basis. Therefore, pick the duration you want to calculate your income statement. The length ideally helps businesses evaluate the financial state of their businesses

## Write the income statement header.

First, write the name of the company, then beneath it write “Income Statement,” next is the time that your income statement is to cover.

## Build your income statement based on the four sections that are part of its format.

The first section of the income statement is for you to calculate your gross profit, which is the total amount of money made. Then calculate your total operational expenses.

The third section calculates gains and losses that are not related to your operational costs.

## Step 1; On your gross profit section

-write sales revenue below the income statement header. The Sales revenue part should contain all the revenue from the sale of goods and services. Therefore list all your purchases for your period. Then calculate all your costs and products; the cost of all goods sold should be beneath your sales revenue. To find your gross profit subtract the cost of goods sold from sales revenue. The difference between the two is then written on the next line.

## Step 2; On calculating your operational expenses

Thus first list all types of operating expenses your business has and list the amount of cost next to each item stated. In cases whereby the company has many expenses, group them into categories based on their similarities for more straightforward calculation and space on your income statement. Next, find the amortization and depreciation expenses, which are methods to reduce the recorded assets. Finally, add all your costs and write down your total expenses on the next line.

## Step 3:Calculate gains and losses not related to your operational costs.

First, write the profits that are non-operational to your business, these revenues that do not directly relate to your business. After listing them add all of them and write the total on the next line

After calculating your gains, calculate your losses, List all the items, and the expense incurred for each of them. Add all your looses incurred and write them on the next line to differentiate losses, and gains figures use different shades of color to record them on your spreadsheets.

## Step 4: Calculate your net income

find your gross profit previously calculated to your non-operational gains, sum them together to find your total profit. Then next, find the total expenses by combining operational and non-operational losses, sum them together, and find the full costs you had. Finally, to get your net income to subtract the total losses from your overall gains. Then write down the net income at the bottom of your statement.

Tip: Information needed to make an income statement should be collected from a prepared company trial balance or ledger, journal, etc.

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