7 INCOME STATEMENT
Summary
TLDRIn this educational lecture, Dr. Osama Cash explains the concept and formulation of an income statement, a financial report summarizing a company's revenues, expenses, and net profit or loss. He demonstrates how to apply this knowledge in Excel, showing calculations for revenues, expenses, and net income, and comparing financial data between two years. The presentation highlights Excel's utility in organizing and calculating financial data effectively.
Takeaways
- 📊 The income statement is a financial report that shows a company's revenues, expenses, and the resulting profit or loss over a specific period.
- 🔍 Dr. Osama is teaching students how to formulate an income statement and the benefits of using it in financial analysis.
- 💻 The lecture includes a practical application of income statements in Excel, demonstrating how to organize and calculate financial data effectively.
- 📈 Revenues are calculated by adding sales revenue, interest revenue, and gains from the sale of assets, as illustrated with the example of 108,000.
- 🛒 Expenses include cost of goods sold, commissions, office supplies, equipment, advertising, and interest expenses, totaling 90,000 in the example.
- 💡 The difference between total revenues and total expenses determines net income or net loss, which is the company's profit or loss.
- 📝 The script provides a step-by-step guide on how to input and calculate the income statement components in Excel, including using the SUM function.
- 📉 The example given shows a comparison between two years, 2015 and 2020, to demonstrate how Excel can be used for year-over-year financial analysis.
- 📋 Excel's flexibility allows for adjustments in cell size, formatting, and data entry, which can be tailored to the user's preferences and needs.
- 📊 The script explains how to calculate income before taxes and net income after taxes using Excel, emphasizing the importance of accurate financial reporting.
- 👨🏫 Dr. Osama emphasizes the educational aspect of the lecture, reminding students to refer back to previous videos for a deeper understanding of Excel applications in financial statements.
Q & A
What is the main purpose of an income statement?
-The main purpose of an income statement is to show a company's revenues, expenses, and the resulting net profit or loss over a specific period of time.
How does an income statement calculate net income?
-Net income is calculated by subtracting total expenses from total revenues. If revenues exceed expenses, the result is a net profit; if expenses exceed revenues, the result is a net loss.
What are some examples of revenues mentioned in the script?
-Examples of revenues mentioned in the script include sales revenues, interest revenues, and gains on the sales of assets.
What are some examples of expenses mentioned in the script?
-Examples of expenses mentioned in the script include cost of goods sold, commissions expenses, office supply expenses, office equipment expenses, advertising expenses, interest expenses, and loss from lawsuits.
How does the script differentiate between interest revenues and interest expenses?
-Interest revenues are the earnings from money deposited in the bank, while interest expenses are the costs associated with borrowed money, such as loan interest.
What is the significance of the difference between total revenues and total expenses?
-The difference between total revenues and total expenses determines the net income or net loss of a business, which is a key indicator of its financial performance.
How can Excel be used to facilitate the creation and management of an income statement?
-Excel can be used to organize data, perform calculations such as summing revenues and expenses, and automatically update totals and net incomes as data changes.
What is the formula used in Excel to calculate the sum of a range of cells?
-The formula used in Excel to calculate the sum of a range of cells is '=SUM(start_cell:end_cell)', where 'start_cell' and 'end_cell' are the references to the first and last cells in the range.
How does the script demonstrate the use of Excel functions for calculating totals?
-The script demonstrates using the SUM function and the AutoSum feature in Excel to calculate the total of a range of cells, showing two methods to achieve the same result.
What is the role of 'income before taxes' in the income statement?
-Income before taxes is the amount of income a company has earned before accounting for tax expenses. It is calculated by subtracting total expenses from total revenues.
How does the script illustrate the calculation of net income after taxes?
-The script illustrates the calculation of net income after taxes by deducting the calculated tax expenses from the income before taxes.
Outlines
📈 Introduction to the Income Statement
Dr. Osama Cash begins the lecture by welcoming the students and introducing the topic of the income statement. He explains that they have previously covered the formulation and uses of the income statement. The lecture aims to demonstrate how to apply the income statement in an Excel program. The income statement is described as a record of revenues and expenditures, showing the net profits or losses by subtracting expenses from revenues. Examples of revenues include sales revenue, interest revenue, and gains on asset sales. The lecturer shares his screen to visually guide the students through the process.
📊 Applying the Income Statement in Excel
The second paragraph delves into the practical application of the income statement using Excel. Dr. Cash shows how to input data and perform calculations in Excel to compare the income statement of two different years. He demonstrates how to enter company names, calculate revenues by summing different revenue streams, and use Excel functions like SUM to automate calculations. The paragraph also covers how to adjust cell sizes and enter data in a structured manner, emphasizing the importance of Excel in organizing financial data.
💼 Calculating Expenses and Income Before Taxes
In the third paragraph, Dr. Cash continues the discussion on Excel applications, focusing on calculating expenses and determining the income before taxes. He explains how to input various expense items such as cost of goods sold, interest expenses, and wages. The lecturer demonstrates how changes in one cell can automatically update the total expenses, showcasing the dynamic nature of Excel. He also calculates the income before taxes by subtracting total expenses from total revenues and discusses the impact of taxes on net income.
💡 Conclusion and Excel's Role in Financial Organization
The final paragraph wraps up the lecture by summarizing the importance of Excel in organizing and calculating financial data. Dr. Cash highlights how Excel has helped in systematically presenting the income statement, making it easier to understand and analyze. He thanks the students for their attention and emphasizes the value of Excel in managing financial information, particularly in calculating net income and applying taxes.
Mindmap
Keywords
💡Income Statement
💡Revenues
💡Expenses
💡Net Profit
💡Excel
💡Cost of Goods Sold (COGS)
💡Interest Revenues and Expenses
💡Net Income
💡Formulas
💡Autosum
💡Taxation
Highlights
Introduction to the income statement and its formulation by Dr. Osama
Explanation of the income statement's role in showing revenues, expenses, and net profits or losses
Application of income statements in Excel for better organization and calculation
The importance of sharing the screen to visually demonstrate the income statement in Excel
Detailed breakdown of revenue components including sales, interest, and gains on asset sales
Calculation of total revenues with an example of summing up different revenue streams
Discussion on expenses including cost of goods sold, commissions, office supplies, and advertising
Clarification of the difference between interest revenues and interest expenses
Demonstration of calculating total expenses and deriving net income
Explanation of how net income is derived from total revenues minus total expenses
Introduction of Excel functions for summing values and their application in income statements
Use of Excel's autosum feature for quick calculation of totals in income statements
Excel application in comparing income statements of two different years
Adjusting figures in Excel and observing the impact on total expenses and net income
Calculation of income before taxes and its significance in financial reporting
Deductions of income tax expenses from income before taxes to find net income
Excel's role in streamlining the process of creating and analyzing income statements
Transcripts
welcome back my dear students
this is Dr Osama cash for your teacher
and today we are going to talk about the
income statement
we had previously a lecture about the
income statement and how to formulate
the income statement and what are the
uses of the income stated
and then we will apply
the income statements into Excel program
and how can you get benefit of you of
excel in formulating the income
statement income statement show me the
the revenues and the expenses then when
we say revenues minus expenses it will
give me net profits or net losses and
this is the way it is so this is how the
income statement looks like
and let me remind you but first I have
to share my screen
I have to share the screen first so
everybody can see what is here
as you see now
the income statement like the way you
see it is including
of course the increment statement also
for the companies which is um
uh usually for the a year ended in or
for the months ended in or for the
period like quarterly or semi-annually
or annually the income statements
prepared
so the income statement is a record of
your revenues and your expenditures
and the difference between them will
give me at the end they think as example
here we have the revenues like the sales
revenues my sales operation how much
I earned from the sales
it equals number of units sold
times the price of each
interest revenues for me money for me is
coming for me as
an example I put money in the bank and
this money give me as a company interest
so this is earns
gain on the sales of assets as example I
sold assets with five thousand I earned
2 000 as profit so those are also gains
on sale it's on assets so any revenues
will be here so when we come to see here
now one hundred thousand plus five
thousand plus three all will come to 108
000.
this is the total revenues likewise I
did for the revenues I ordered for I
will do for the expenses so for the
expenses I will talk to the cost of got
sold this is 75 000 commissions expenses
like you pay commissions for the people
you pay commissions for the salesman
this is 5000 office supply expenses 3500
office equipment expenses two thousand
five hundred advertising expenses
because you must pay for advertising
advertisement
so that your product will run and you
will promote your project through the
advertising you paid two thousand
interest expenses now
you took as example loan and you have to
pay the loan plus the interest so the
interest expenses which you paid here is
500 this is different than the interest
revenues
and the interest revenues you deposit
money in the bank but here you lend
money from the bank you lend or borrow
money from the bank
okay so the first interest is yours the
second is interest is you you have to
pay it
this one you have to pay it but this one
you earn it the interest revenues here
you earn it but here the interest you
have to pay it
and you have to pay the interest here
here
in the entrance
okay less loss from lawsuits as example
you have some losses or whatever it was
1500 so all the total expenses are 19
000 if we calculate those 75 000 plus
five thousand plus three thousand five
hundred plus two thousand five hundred
plus two thousand plus five hundred plus
one thousand five hundred Orwell comes
to ninety thousand
so so what I have revenues of one or
eight thousand revenues of 108 000 and I
have expenses of ninety thousand
simply if you your earns are one or
eight thousand and your expenses are
ninety thousand then you earn net income
your net income will be eighteen
thousand which is the day between one or
eight thousand Euros and
your expenses ninety thousand we call
this in business this eighteen thousand
we call them net income the profit
and it was as if it was a minus it will
be net losses okay
now the time comes to apply this
on the Excel
how we will get use of the Excel to
check out for the income statement how
we will work on the income statement in
Excel
okay here's an income statement
and we have here comparison between two
years 215
and 220 and this is the income statement
like we said you can write your company
name here as example L for our company
Alpha and this is income C years ended
in 2020.
so this is what we write now I just want
to remind you uh sorry I just want to
remind you
about uh what we started to talk in the
start that this is Excel program how did
I know that this Excel though behind
Detroit no it doesn't mean anything
because here are the cells as example if
I stop here
this is including cell C and D together
and the line six
if I stop here as example
it's e cell e with line six
if I stop here
it's cell f with line six and so on so
and also I can write I can write
whatever I want to do I can write the
numbers
I can just return it back the way it is
or middle of the way I can do here as
example enlarge DF or decrease it that's
all left up to me I will turn back
to the situation where
uh will have
we wrote the name yeah
okay then Ctrl f z
this was the final
uh
situation we have
okay so now it's Alpha and it's an
income statement and 2020. now the sales
revenue let me say here the sales value
was one ten thousand dollars or one
hundred thousand dollars in 2014 they
were 150
000 dollars
now Less sales returns and allowances I
don't have sales returns
I have service revenues service revenues
where 50 000 I will make it forty
thousand
I got because I'm doing Services I have
revenue from it the world Revenue
means you will edit right here let's say
it was 30
000.
okay
then here it will be 180 and here it
will be 100 plus 40 would be 140.
likewise I told you before how will I
get this number one
because I counted I input The 100
and I have input the 150 and I input the
40 000 and the thirty thousand how did
this was calculated the idea the same
idea which I showed you before
what is the idea which I showed you
before
let us see another Excel application
and we'll show it to you
so if I say as example let me stop here
and I say 100
and here is 200
okay and I want the sum of this here I
want the sum of those two numbers here I
know that 100 200 and 300 but the
problem when they increase
so I would say equals sum s u m and here
I will take the function sum then I will
open bracket
the cell the first cell is f
and the line is one so f 1
then in between brackets
F1 this is our answer is F1
F1 2
this is F1 to F2
F2
then I will close the bracket
then press enter
it gave me 300. that's how it worked
usually we said this is the way to work
or there is another way
like as example if I don't want to do it
by this way
I can go to
uh the functions the functions itself
or I will go to the uh the column of the
formulas so I want the submission of
this audio system then I will tell him
some
here it is autosum and I will tell some
so he will say what do you want 100 and
800 that's fine okay here you got it
300.
so this is another way to calculate the
sum at the Excel program
so we have to do it two ways yeah
and I showed this before in one of the
videos please watch it back okay
now we'll go to the expenses the part of
the expenses how far we have expenses
here
let me put this as example the expenses
here was
200 dollars and here on year 2014 it was
230 dollars
and cost of got sold let me say the cost
of goods sold was 10
000
and here the cost of goods sold was 11
000
then let me see about the interest
expenses and the maintenance repairs and
whatever if I have any more expenses
like as example now I will say this ten
dollars ten thousand of course I'm
trying to simplify the numbers as much
as I can
twelve thousand so that the idea is how
to do it
the idea is how to do it okay
then here also I have sales and wages
let us say forty thousand
and here we have cells travels and wages
of 45
000.
so now look at this when I press here
the whole total expenses will change
now the total expenses became sixty
thousand look at this
10 and 10 20 and 40 we have sixty
thousand and two hundred this is the two
hundred this is the 200 so 210
and 10 and 40 60 200.
okay same likewise the same thing here
for the second year which is 14 14
2014. 230
Plus
one hundred thousand plus two twelve
thousand this is eleven thousand plus
twelve thousand plus forty five thousand
will give me sixty eight thousand two
hundred and thirty
so this was about the total expenses
okay
then the need before income is worth the
gap between them one habits abstract
like 140 minus
the seventy the sixty thousand two
hundred that will give me 79 800.
okie dokie
okie dokie
same thing I will do here
so the system calculated 180
000 minus 68 000 to 27 230 then it will
give me one one seven seven zero
okay
I said the total revenues mine minus the
total expenses that will give me the
income before taxes
okay
now if I know the taxes or I calculated
the taxes and I found that the text is
where 15 960 or maybe like we will say
that if I give let's say 10 percent of
the net income then this cell will be 37
e 37
uh will be uh the amount the total
amount or 8 30
income tax expenses 838 will be 8 30 e
37
times the taxes as example 12 13 or
whatever
okay
now I got the income taxes and I have
the income before taxes I will deduct
them so 79 800 minus 15. thousand nine
hundred and sixty this will give me 63
840.
likewise the same thing for the other
year
okay so the net income is like what you
see in the net income after the taxes
Excel helped me to organize this work it
helped me to organize this work
thank you so much for listening to the
net income and the application by Excel
thank you
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