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1. List all income and expenses from your trial balance on a page called ?Income Statement?.

2. Calculate the gross profit as income less direct expenses (directly incurred to bring goods to the point of sale). Remember to include opening and closing stock values.

3. Calculate the net profit as gross profit less administrative expenses (for general running of the business). You can list the administrative expenses on the face of the income statement or in a note to the accounts.

4. Remember to include depreciation on fixed assets.

5. Include interest paid that was included in your loan repayments.? The capital portions of the loan repayments are not included in the income statement.

6. Only include your drawings if you operate a registered company.

7. Add your accrued expenses and deduct your prepaid expenses.

8. List the prior year income and expenses in a second column.

9. How well has your business performed compared with the prior year?? Do you see anything that looks unusually large or small?? Trace it back to the detail to see why it has changed.