The Interactive Income Statement

This feature and its companion, the Interactive Balance Sheet, are designed to help beginning investors understand the basics of company financial statements and determine where potential trouble spots might occur.

Here's how it works: Click on a linked line item in the sample income statement below. Your browser must have JavaScript enabled in order to use this feature.

The line items highlighted were chosen because they're some of the first places the auditors go to ensure that a company is in compliance with Generally Accepted Accounting Principles. We also highlight some ways a company uses accounting that may be aggressive -- but still in accordance with GAAP. For each, we give the pitfalls a company can face, and the weapons you can use to identify problems.

	Revenue							550,000
	Cost of goods
		Beginning inventory				40,000
		Net purchases				325,000
		Cost of goods available for sale				365,000
		Less: ending inventory				(35,000)
		Cost of goods sold						(330,000)
		Gross margin on sales						220,000
	Expenses
		Selling expenses
			Sales salaries	48,000
			Nonrecurring item	12,000
			Other	13,000		73,000
		General and administrative expenses
			Office salaries	27,100
			Depreciation	5,500
			Amortization	3,200
			Bad debt	4,500
			Other	24,200		64,500
		Total operating expenses						(137,500)
	Income from operations							82,500
	Other revenues
		Interest				5,200
		Dividends				7,200
		Gain on sale of equipment				8,600		21,000
								103,500
	Other expenses
		Interest				9,400
		Writeoff - goodwill				5,000
		Unusual item - loss on sale of long-term investment				5,100		(19,500)
	Income before taxes and extraordinary items							84,000
	Income tax expense							(33,600)
	Income before extraordinary items							50,400
	Extraordinary item - gain on disposal of business segment							24,000
	Net income							74,400
	Other Comprehensive Income							12,000
	Comprehensive Income							86,400