Finances Accounting plays an important role in any business.

1. Finances Accounting plays an important role in any business. Why do you think it is important for a business to keep track of its expenses?

2. Lesson Objective Complete an income statement. Content Vocabulary income statement A statement that shows in detail a business’s income and operating expenses, also called a profit-and-loss statement. profit-and-loss statement A statement that shows in detail the income and operating expenses of a business, also called an income statement. net income Any money left over after expenses have been deducted from gross profits, also called net profit. net profit Any money left over after expenses have been deducted from gross profits, also called net income. • income statement • profit-and-loss statement • net income • net profit

4. Example 1 Three months after opening The Clothing Store, the Agees prepare an income statement. Sales for the first three months totaled $12,174. Merchandise totaling $173 was returned to them. The Agees’ inventory records show that the goods they sold cost them $3,817. Records show their operating expenses totaled $8,047. What is their net income?

5. Example 1 Answer Step: Find the net income.

6. Practice 1 Find the gross profit on sales and the net income. Sales: $145,718 Returned merchandise: $1,567 Cost of goods sold: $60,461 Total operating expenses: $5,092

7. Practice 1 Answer Gross profit on sales: $83,690 Net income: $78,598

8. Practice 2 Find the gross profit on sales and the net income. Sales: $39,745 Returned merchandise: $1,025 Cost of goods sold: $19,046 Total operating expenses: $3,429

9. Practice 2 Answer Gross profit on sales: $19,674 Net income: $16,245