Income statement

Meaning

The income statement (قائمة الدخل), the statement of profit or loss under IFRS, shows what a business earned and spent over a period and what was left. Its order under the IFRS for SMEs that Saudi private companies follow: revenue, cost of sales, gross profit; operating expenses, operating profit; finance cost, profit before zakat; zakat or income tax; net profit for the year. Costs are shown as negatives; subtotals are the lines readers compare year on year.

Expenses may be presented by function (cost of sales, selling, administrative), as most Saudi companies do, or by nature (materials, staff, depreciation). The net profit carries to retained earnings on the balance sheet. The zakat charge is computed on the zakat base, not on this profit, so the two figures rarely agree.

Also called: profit and loss · P&L · statement of profit or loss · قائمة الدخل

Example

Revenue 860,000.00 less cost of sales 410,000.00 is a gross profit of 450,000.00 (52 percent). Operating expenses of 327,000.00 leave 123,000.00; finance cost of 4,000.00 gives 119,000.00 before zakat; after zakat of 2,975.00 the net profit is 116,025.00, which moves to equity.