Easy Way to Create an Income Statement for Your Culinary Business!

An income statement is one of the essential financial reports that every culinary business must have. This report outlines the company's revenue and expenses over a specific period, allowing you to determine the net profit generated.

In this article, we won't focus on the benefits or detailed elements of an income statement. Instead, we will provide a comprehensive guide on how to create an income statement in a simple format.

Let’s dive in!

How to Create an Income Statement

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To create an income statement, you'll need complete and accurate financial data for your culinary business, including all income and expense transactions. Here are the steps to follow:

1. Determine the Reporting Period

The first step is to decide on the reporting period you want to cover, which could be monthly or yearly, depending on your business needs.

2. Create a Trial Balance Report

Next, prepare a trial balance report that contains all data for each account in the ledger.

3. Calculate Revenue

After completing the trial balance, calculate the company’s total revenue during the specified period.

4. Calculate the Cost of Goods Sold (COGS)

In addition to calculating revenue, make sure to calculate the COGS. This will help you determine the gross profit or loss for your business.

5. Calculate Gross Margin

The next step is to calculate the gross margin, which is the difference between total revenue and COGS. This shows the gross amount earned from sales.

6. Calculate Operating Expenses

Finally, calculate all operating expenses and include them in the administration and sales costs section.

Income Statement Example

An income statement doesn't just show revenue, but also expenses, net profit, and earnings per share. Typically, this report is prepared quarterly or annually.

There are two main types of income statements: single-step and multi-step. Here's an explanation of both:

1. Single-Step Income Statement Example

For the formula used:

Net Profit = Revenue – Expenses

The single-step income statement is very simple! All revenue is listed at the beginning, followed by all expenses and losses. Then, calculate net profit by subtracting total expenses from total revenue.

Read also: No Hassle! Easy Ways to Create Financial Reports for Restaurants

2. Multi-Step Income Statement Example

For the formula used:

Gross Profit = Net Sales - COGS
Operating Income = Gross Profit - Operating Expenses
Net Income = Operating Income + Non-Operating Income

The multi-step income statement is more detailed because it separates transactions into operational and non-operational categories. After that, you can compare expenses with income.

Whether large or small, an income statement is crucial for any business. The bigger the company, the more complex the report becomes. However, for small businesses or SMEs, an income statement is still essential.

Although creating an income statement might seem complicated at first, ESB, an expert in culinary business solutions, simplifies this process with the ESB POSLite cashier application, which features a profit and loss report. All financial data, including income and expenses, are recorded accurately and neatly, making it easy to check reports efficiently and in detail.

An income statement allows you to see whether your business is profitable or losing money and helps you assess the company’s performance.

So, always make sure to prepare an accurate income statement!