The expenses associated with that revenue generation and/or period are also recognized. This means that sales are recognized in the period in which they are generated. The accruals concept is the main principle applied when building the income statement.
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These frameworks provide the rules and guidelines upon which the statement is prepared. The income statement is prepared according to one of the following frameworks IFRS or US GAAP. The Coca-Cola Company – Income Statement 2017 The last line on the statement is net income, which is the profit after all expenses have been deducted for the period. Financing the business comes next, followed by taxes on profits. For example, cost of sales (or cost of goods sold) is immediately below sales, followed by expenses to support the business. The expenses most easily associated with sales come first. It outlines revenue first, followed by all expenses.
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The income statement explains the changes in retained earnings between two accounting periods.