The Income Statement of QuickBook's Business Plan Workbook - dummies

The Income Statement of QuickBook’s Business Plan Workbook

By Stephen L. Nelson

The Income Statement schedule has 13 rows of calculated data. As in other schedules, the period identifier simply numbers the periods for which values are calculated. The first period is stored in cell C99 as the integer 1, and the periods that follow are stored as the previous period plus 1. The other values in the Income Statement are calculated as described here.

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Sales Revenue

The Sales Revenue figures are the estimates that you enter in the inputs area of the business planning starter workbook. The amount for the period is the value that you enter in the inputs area of the business planning starter workbook.

Less: Cost of Sales

The Cost of Sales figures are the Cost of Sales estimates that you enter in the inputs area of the business planning starter workbook.

Gross Margin

The Gross Margin figures show the amounts left over from the sales proceeds after subtracting Cost of Sales. Subtracting your other expenses from the Gross Margin amount gives you your profit figure. The Gross Margin formula is Sales Revenue for the period minus Cost of Sales. For example, the formula for the first period is

=C100+C101

The formula for the second period is

=D100+D101

and so on. Notice that because the Cost of Sales figures are pulled into the Income Statement schedule as negative amounts, the Gross Margin formula simply adds the Sales Revenue figure to the negative Cost of Sales figure.

Operating Expenses: Cost Centers 1, 2, and 3

The Operating Expenses figures for Cost Centers 1, 2, and 3 show the amount for each operating expense classification or category that you enter in the inputs area of the business planning starter workbook.

Total Operating Expenses

The Total Operating Expenses figures show the sums of the operating expenses that you enter in the inputs area of the business planning starter workbook for these three operating expense categories or classifications. The total for each period is the sum of the operating expenses for Cost Centers 1, 2, and 3. For example, the formula for the first period is

=SUM(C105:C107)

The formula for the second period is

=SUM(D105:D107)

and so on.

Operating Income

The Operating Income figures show the sales dollar amounts left after paying the Cost of Sales and the Operating Expenses. The Operating Income figures represent the amounts that go toward paying your financing expenses and income tax, as well as the amount that constitutes your profits. The amount for each period is the Gross Margin figure for the period minus the Total Operating Expenses figure. For example, the formula for the first period is

=C102 – C108

The formula for the second period is

=D102 – D108

and so on.

Interest Income

The Interest Income figures show the earnings from investing the cash of the business. The amount for each period is the beginning Cash & Equivalents balance from the inputs area of the business planning starter workbook multiplied by the period yield on Cash & Equivalents. For example, the formula for the first period is

=B43*C5

The formula for the second period is

=C43*D5

and so on.

Interest Expense

The Interest Expense figures show the costs of using borrowed funds for operations and asset purchases. The amount for each period is the value that you enter in the inputs area of the business planning starter workbook.

Net Income (Loss) Before Taxes

The Net Income (Loss) Before Taxes figures show the amount of operating income left after receiving any interest income and paying any interest expense. The amount for each period is the Operating Income figure for the period plus the Interest Income figure for the period, minus the Interest Expense figure for the period. For example, the formula for the first period is

=C109+C111 – C112

The formula for the second period is

=D109+D111 – D112

and so on.

Income Tax Expenses (Savings)

The Income Tax Expenses (Savings) figures show the income tax expenses (or savings) that use the calculated Net Income (Loss) Before Taxes figures and the Marginal Income Tax Rate figures that you forecasted in the inputs area of the business planning starter workbook.

Notice that the model calculates a current period savings in income taxes when there’s a net loss before taxes. This may be the case when a current period loss is carried back to a prior period or when the current period loss is consolidated with the current period income of related businesses.

Basically, then, the model assumes that a net loss before income taxes results in a current period tax refund — that is, an overall tax savings — because you can deduct a loss in one business from the profits of another business. However, if a current period loss doesn’t result in a current period income tax savings, you modify the formula.

The amount for each period is the Net Income (Loss) Before Taxes multiplied by the Marginal Income Tax Rate figure. For example, the formula for the first period is

=C37*C113

The formula for the second period is

=D37*D113

and so on.

Net Income (Loss) After Taxes

The Net Income (Loss) After Taxes figures calculate the after-tax profits of operating the business. The amount for each period is the Net Income (Loss) Before Taxes figure minus the Income Tax Expenses (Savings) figure. For example, the formula for the first period is

=C113 – C115

The formula for the second period is

=D113 – D115

and so on.