Accurate income and expense statements are an absolutely invaluable resource to any business, and here at AFS Taxsavers we are happy to draft them for you with absolute precision. In order to make accurate financial decisions concerning your business you absolutely need to know how much revenue is going both in and out of your company. Are you turning a profit or are your sales in decline? This is perhaps the most basic question one can ask about the status of any business. It is also the most important. With one of our income/expense statements in hand you’ll have easy access to your company’s most vital statistics.
What Do These Statements Cover?
Basically, they’ll describe the financial flow of your business over the previous fiscal year: how much revenue is going in and how much is going out due to the various expenses which every business has to face. In the end, we will calculate what is known as a “net income,” essentially the amount of money your company has successfully brought in during the monitored period. When this figure is compared to net incomes reported in previous years you’ll be able to see whether or not your company is in fact currently profitable, or if there’s cause for concern.
How Do You Calculate Net Income?
- We’ll begin by looking at your net sales, basically how much you sold to your customers in terms of goods and/or services and how much revenue those sales brought in.
- Then, we’ll look at the cost you incurred to make those sales profitable. What was the cost of the raw materials used? How much capital did you spend purchasing the merchandise you then sold to your customers? How much did it cost to provide the services you offered? What was the cost of the tools necessary to do so?
- Once these amounts have been calculated we’ll be able to determine your gross profit, how much money you earned as a result of the money you spent.
It would be easy to stop here and basically claim whatever profit you earned as your net income, but there are in fact a great many more factors to consider, the kind which often get overlooked. For example:
- The operational expenses/income of your business
- The level of interest you’ve incurred for borrowed funds or have earned on your own funds
- The taxes you expect to pay
- Foreign currency exchange rates
- One-off or unusual expenses
Once all of these elements are taken into consideration your net income can be calculated.