value of production income statements
TRANSCRIPT
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The European format: value of production
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2
Sales revenue 75,000$
Less: Sales returns and allowances (5,000)$
Sales discounts (3,500) (8,500)
Net sales revenue 66,500
Cost of goods sold 32,000Gross profit 34,500
Operating expenses
Salary expense 12,000$Supplies expense 1,500
Depreciation expense 2,000
Utilities expense 1,200 16,700
Operating income 17,800
Other revenue and (expense)
Interest expense (8,500)$Net Income 9,300
Any CompanyIncome Statement
Year Ended December 31, 2011
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Manufacturing expensesSelling expenses
R&D expenses
Administrative expensesInterest expenses
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MaterialsServices
Labor
Interest expenseDepreciation and amortisation
Provisions
Taxes
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1. INCOME STATEMENT
- cost of sales
- selling, administrative andother operating expenses
OPERATING INCOME
- interest expenses
extraordinary items
- taxes
NET PROFIT (LOSS)
2. INCOME STATEMENT
Value of production
- costs of production:
Materials,
Services,
Personnel,
Depreciations
Provisions...
OPERATING INCOME
- interest exp.
extraordinary items
- taxes
NET PROFIT (LOSS)
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The value of production comprises sold andunsold production. It also includes productionnot meant to be sold, such as self-production.
By comparing the value of production with thecost of production, the operating profit isdetermined.
The operating profit determined in the twoformats (cost of sales and value of production)
is exactly the same.
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Revenue from salesChange in inventory of finished products and work in
progress
Work performed by the enterprise and capitalized
Total value of production
- Value of materials used
-Personnel expenses
-Depreciation & amortization-Other operating expenses
Operating profit (loss)
Sample value of production income statement
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1. INCOME STATEMENT
Sales
- cost of sales
- selling, administrative and otheroperating expenses
OPERATING INCOME
- interest expenses
extraordinary items
- taxes
NET PROFIT (LOSS)
2. INCOME STATEMENT
Value of production
- costs of production:
Materials,
Services,
Personnel,
Depreciations
Provisions...
OPERATING INCOME
- interest exp.
extraordinary items
- taxes
NET PROFIT (LOSS)
Classified by functionClassified by nature
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COST OF PRODUCTION:MATERIALS USED
COST OF SERVICES (manufacturing)
STAFF COSTS (manufacturing)
DEPRECIATION AND AMORTISATION (manufacturing)
- COST OF UNSOLD PRODUCTION:
CHANGES IN INVENTORY OF FIN. PRODUCTS AND W.I.P.
WORK PERFORMED BY THE ENTERPRISE AND CAPITALISED
= COST OF SALES
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Globo-Chem Co. starts production in year 1, without selling anything. In thesecond year, the company sells the entire production obtained in theprevious financial period, without manufacturing anything.
Data are reported below:
Year 1 Year 2
Units produced 1,000 0
Unit cost of prod. 5
Units sold 0 1,000
Unit price 6.5
General expenses 400 400
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Year 1 Year 2Sales 0 6,500
- Cost of sales 0 (5,000)
Gross profit 0 1,500
- General expenses (400) (400)
Net profit (loss) (400) 1,100
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Year 1 Year 2Sales 0 6,500
+ Change in Products 5,000 (5,000)
Value of production 5,000 1,500
- Manufacturing expenses (5,000) 0
- General expenses (400) (400)
Net profit (loss) (400) 1,100