Description of accounts
Let's look at a description of each account included in the example Income Statement for XYZ Corporation.
NET SALES total value of all goods or services sold by the company as part of its normal business operations during the period
COSTS AND EXPENSES
LABOR ANDM ATERIALS total amount spent on labor wages and material costs to produce the items sold for the period. It is common for these costs to be separated into two accounts: material costs listed as
COST OF GOODS SOLD and labor listed as DIRECT LABOR COST
DEPRECIATION amount charged by the company for the use of fixed assets to produce the items sold. This is not a cash expenditure. It is an estimate of the decline in value of the plant and equipment resulting from its use during the period.
SELLING E XPENSES amount spent to sell the products or services produced (includes advertising, sales commissions, promotions, etc.)
GENERAL AND A DMINISTRATIVE amount spent to manage the production and sales of the company's products or services (includes management salaries, office equipment, support staff, etc.)
LEASE P AYMENTS amount spent on leasing plants, equipment, office space, etc