In practice for financial accounting, we ever knew cost of goods sold ( for merchandising company) or cost of products sold ( for manufacturing company) that are shown in income statement, but we rare saw cost of service ( for service company) in income statement.
Below are forms of income statement for each company:
Example 1-Income Statement for Merchandising Company
ABC Company
Income Statement
31 December 2018
Sale…………………………………………..20,000
Cost of goods sold……………………..…(7,000)
Gross Profit………………………………..13,000
Less Expenses
Admin…………………………………….…..5,000
Marketing and Selling Expense…….3,000
Profit before Finance Cost/Interest..5,000
Finance Cost/Interest………………....(1,000)
Profit before income Tax………….…..4,000
Income Tax…………………………..…..(1,000)
Net profit……………………………3,000
Example 2-Income Statement for Manufacturing Company
XYZ Company
Income Statement
31 December 2018
Sale…………………………….……………60,000
Cost of Products Sold…………….……(21,000)
Gross Profit………………………………..39,000
Less Expenses
Admin………………………………………..15,000
Marketing and Selling Expense………9,000
Profit before Finance Cost/Interest.15,000
Finance Cost/Interest……………..…...(3,000)
Profit before income Tax…………..….12,000
Income Tax………………………………...(3,000)
Net profit………………………..……9,000
Example 3-Income Statement for Service Company
Below it is format that is rare shown in income statement for service company.
Phnom Penh HR Company
Income Statement
31 December 2018
Service Income…………………………..40,000
Cost of Service………………………..…(14,000)
Gross Profit………………………………26,000
Less Expense
Admin……………………………………….10,000
Marketing and Selling Expense……….6,000
Profit before Finance Cost/Interest..10,000
Finance Cost/Interest………………..….(2,000)
Profit before income Tax………………..8,000
Income Tax…………………………..….…(2,000)
Net profit…………………………….6,000
In practice, below it is format that is shown in income statement for Service Company.
Phnom Penh HR Company
Income Statement
31 December 2018
Service Income…………………………… 40,000
Less Expense
Admin……………………………………….24,000*
Marketing and Selling Expense……….6,000
Profit before Finance Cost/Interest..10,000
Finance Cost/Interest………………..….(2,000)
Profit before income Tax………………..8,000
Income Tax……………………………..…(2,000)
Net profit……………………………..6,000
*Cost of service is combined with admin cost, so admin cost = 10,000 + 14,000=$24,000