Income Statement Format by Nature of Expense
The expenses in an income statement are either classified by their nature or by their function.
An income statement by nature method is the one in which expenses are disclosed according to their nature such as office rental, salary expense, Office supply expense, depreciation depreciation etc.
There is no reallocation of these expenses to different functions of the company or organization such as cost of goods sold, marketing costs, administrative costs and other expenses.
Below is example of income statement format by nature.
| Company ABC | ||
| Income Statement | ||
| For the Year Ended December 31, 2015 | ||
| Sales | 200,000 | |
| Expenses: | ||
| Beginning Inventory | 20,000 | |
| Purchases | 100,000 | |
| Ending Inventory | (80,000) | |
| Depreciation Expense | 14,000 | |
| Office Rent Expense | 15,000 | |
| Salaries Expense | 30,000 | |
| Office Supplies Expense | 3,000 | |
| Utilities Expense | 7,000 | |
| Interest Expense | 700 | |
| Income Tax Expense | 20,000 | |
| Total Expenses | (129,700) | |
| Net Income | 70,300 | |