The Income Statement

The income statement shows the profit a business made over a period.

Cost of sales and gross profit

$$\text{Cost of sales} = \text{opening inventory} + \text{purchases} - \text{closing inventory}$$ $$\text{Gross profit} = \text{sales} - \text{cost of sales}$$

Worked example. Opening £5,000, purchases £30,000, closing £4,000 → cost of sales £31,000. Sales £50,000 → gross profit £19,000.