- Revenues (1): amounts reported from sales of goods and services in the normal course of business
- Net revenue (2): Revenue less adjustment for returns and allowance
- Return: Returns inwards are goods returned to the selling entity by the customer, such as for warranty claims or outright returns of goods for a credit.
- Expense (3): Amount incurred to generate revenue:
- Type of expense:
- Cost of goods (4)
- Operating expense (5)
- Interest (6)
- Taxes (7)
- Expense are grouped by its nature of functions
- Depreciation expense: associated with manufacturing or administration
- Cost of goods: cost for manufacturing, labor
- Type of expense:
- Gains and losses (8)
- Increase or decrease of economic benefits
- May not be resulted from ordinary business activity
- Gains = selling surplus equipment in manufacturing
- Formula: difference between the sales price and the book value
- Net income = revenues – ordinary expense + other income – other expense + gains – losses
- Non-controlling interest (9) (minority interest)
- Is ownership position where a shareholder owns less than 50% of the outstanding shares
- Company A acquires 75% in Company B, company A can not claim the entire value of Company B without accounting for 25% that belong to non-controlling Company B.
- Is subtracted in arriving net income
- Is ownership position where a shareholder owns less than 50% of the outstanding shares
