I U abe x* x A A EE = EMITIA . Convert to picture shapes Text SmartArt BOX Styles Checkpoint 3.1 STEP 1: Picture the problem The income statement can be visualized as a mathematical equation using Equation (3-1) as follows: Revenues - Expenses - Profits (3-1) However, this equation belies the level of detail normally included in the income statement. That is, expenses are typically broken down into multiple categories including cost of goods sold, operating expenses (including such things as seling expenses, administrative expenses, and depreciation expenses), finance charges or expenses (interest), and income taxes. After subtracting each of these general categories of expenses a new profit num- ber is calculated. The following template provides a useful guide for reviewing the format of the income statement: Revenues Less: Cost of Goods Sold Equals: Gross Profit Less: Operating Expenses Equals: Net Operating Income Less: Interest Expense Equals: Earnings before Taxes Less: Income Taxes Equals: Net Income I U abe x* x A A EE = EMITIA . Convert to picture shapes Text SmartArt BOX Styles Checkpoint 3.1 STEP 1: Picture the problem The income statement can be visualized as a mathematical equation using Equation (3-1) as follows: Revenues - Expenses - Profits (3-1) However, this equation belies the level of detail normally included in the income statement. That is, expenses are typically broken down into multiple categories including cost of goods sold, operating expenses (including such things as seling expenses, administrative expenses, and depreciation expenses), finance charges or expenses (interest), and income taxes. After subtracting each of these general categories of expenses a new profit num- ber is calculated. The following template provides a useful guide for reviewing the format of the income statement: Revenues Less: Cost of Goods Sold Equals: Gross Profit Less: Operating Expenses Equals: Net Operating Income Less: Interest Expense Equals: Earnings before Taxes Less: Income Taxes Equals: Net Income