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How to Calculate Accruals From an Income Statement

Original post by Ryan Menezes of Demand Media

A company's accrual profit is another name for its net income. This value is its income after expenses, or the difference between its revenues and expenses during a period. If you need to calculate the accrual profit from scratch, you have to compile accounting data about the company's expenses and revenues. However, if you have access to the company's income statement, the process is much simpler. You will find the relevant values on the statement itself.

Step 1

Identify the company's revenue from the income statement. This value may be marked as "gross revenue," "sales revenue" or "total revenue."

Step 2

Identify the company's total expenses from the statement. The statement will list individual company expenses, such as the cost of goods, income tax and interest, but it will usually specify the total expenses. If not, add the separate expenses together.

Step 3

Subtract the company's total expenses from its total revenue. For example, if a company generates $60,000 in revenue from sales one quarter and loses $44,500 in expenses, its accrual profit will be $15,500 -- the difference between the two values.

                   

Resources

  • "Accounting for Non-Accountants…"; Wayne Label; 2010
  • "Bookkeeping the Easy Way"; Wallace W. Kravitz; 1999

References

  • "It's Earnings That Count…"; Hewitt Heiserman; 2005
  • "How to Read a Financial Report…"; John A. Tracy; 2009

About the Author

Ryan Menezes is a professional writer and blogger. He has a Bachelor of Science in journalism from Boston University and has written for the American Civil Liberties Union, the marketing firm InSegment and the project management service Assembla. He is also a member of Mensa and the American Parliamentary Debate Association.

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