Financial statements are prepared to provide information about a company’s assets, revenues, expenses and liabilities. Operating income statements are part of the income statements.
Types of Financial Statements:
Basically, there are four types of financial statements. They are:
Statement of retained earnings
Cash flow statements
Operating income statements are statements, which provide detailed information about a company’s expenses incurred, for carrying out operational activities. The operating income statements reflects the operating results for a particular period. It may be for a month, few months or a year. Income statements, also known as Profit and Loss statements are worked out to find out how much a company has actually earned.
It shows the top line as well as the bottom line. The top line is referred to as the total revenue earned by a company, when the expenses have still not been deducted. On the other hand, a bottom line is the revenue earned after the associated expenses have been deducted . This is the actual income of the company.
Elements of Operating Income Statement:
Operating income statements records and project the following operational activities:
Net revenue: includes settlement of liabilities, additional procurements of assets, services rendered during a specific period. The net revenue earned from these activities is mentioned in the operating income statements.
Expenditure: utilization of assets, fiscal outflow for cost incurred on major operational activities of the company are also highlighted in the operating income statements.
G & A or General and administrative expenditure: expenses incurred on insurance, stationery, professional fees, legal fees, salary of officers, utilities, depreciation are all taken into account under this section.
Cost of goods sold: is the cost involved in producing a particular product.
Expenses for research and development: is the cost involved in carrying out research and development activities.
Depreciation: is the cost of a depreciated asset of the company.
Selling expense: is the cost involved in selling products of the company. In other words, it is the cost involved in working out and implementing marketing strategies.
Last Updated on : 26th June 2013