Income from Operations
What is Income from Operations?
Income from operations is the income a business earns after operating expenses.
![io1](https://seeaccountingnow.online/wp-content/uploads/2020/04/io1.jpg)
How it Works
A trading company will sell goods to customers.
![](https://seeaccountingnow.online/wp-content/uploads/2020/04/io2.jpg)
To do this, they will need to buy those goods in the first place.
![io3](https://seeaccountingnow.online/wp-content/uploads/2021/06/io3.jpg)
The amount paid for them is known as the cost of goods sold (C.O.G.S)
![io4](https://seeaccountingnow.online/wp-content/uploads/2021/06/io4.jpg)
The difference between sales and C.O.G.S is known as the gross margin or gross profit.
![io5](https://seeaccountingnow.online/wp-content/uploads/2021/06/io5.jpg)
To operate the business, the business will need to pay for operating expenses.
![io6](https://seeaccountingnow.online/wp-content/uploads/2021/06/io6.jpg)
This includes expenses such as advertising, payroll, rent, marketing, utilities, and insurance.
![](https://seeaccountingnow.online/wp-content/uploads/2020/04/io7.jpg)
The difference between gross profit and operating expenses is known as income from operations.
![](https://seeaccountingnow.online/wp-content/uploads/2020/04/io8.jpg)
Income from operations is the amount before non-operating expenses.
![io9](https://seeaccountingnow.online/wp-content/uploads/2021/06/io9.jpg)
Non-operating expenses include things like sale or loss on assets and interest.
![io10](https://seeaccountingnow.online/wp-content/uploads/2021/06/io10.jpg)
© R.J. Hickman 2020