Financial Income Statement

Financial Income Statement


When a company makes a sale, it records the revenue as net sales.

It may not receive the cash immediately. For example, a company may sell goods on credit, meaning that the customer will pay at a later date. In this case, the company would record the sale as net sales on the income statement, but would not record the cash inflow until the customer makes the payment.

Net sales can impact a number of other income statement items. For example, an increase in net sales can lead to an increase in gross profit, which is calculated as net sales minus cost of goods sold. This, in turn, can impact other income statement items such as operating income, net income, and earnings per share.

Additionally, changes in net sales can impact the company’s income tax liability.

Ultimately, one key aspect is that an increase or decrease in net sales will impact net income, which is a key component of retained earnings on the balance sheet.

The impact on the income statement will therefore also be visible on the balance sheet, which will be described here in Net Sales