Tesla Prepares a multi-step statement of operations. Under this approach, the company Subtracts various items from its revenue to determine the net income or loss. The profit and loss show more items compared to a single step and are therefore detailed, enabling the user to understand the expenses deducted to determine the profitability of the company. According to the company’s form 10 K (2018), some of the components include revenues, cost of revenues, gross profits, operating expenses and loss from operations. Others include loss before income tax, net loss, and finally, net loss attributable to common stakeholders. Each item has its subsections, and the company follows the process in preparing its financial statements. The following section presents a detailed explanation of the process of making the statement of operations.
Tesla starts by recording all its revenues from the various sources. These are the incomes generated by the company from its business activities like selling items, offering consultation services, or even leasing some of its fixed assets to another company. The company identifies the revenue streams that include sale or leasing automotive, energy generation and storage, services, and others. The company classifies all its revenues into three categories. It then adds up the values to obtain the sum of each subgroup. The total income of the company is then obtained by summing up the three subcategories.
Delegate your assignment to our experts and they will do the rest.
The next step is to determine the cost of revenues, which are the direct expenses that can be attributed to the three revenue sources. Take, for example, automotive sales involve items like raw materials used to manufacture the car, its spares, the direct labor costs, and machine hours. The same applies to lease, energy generation, and services, and others. The total cost of revenue is determined and deducted from the total income to get the gross profit for the company.
The next step is for the company to calculate the expenses that cannot be directly attributed to the three revenue sources. Take, for example, research and development expenses, selling and administration, and restructuring costs. Such items cannot be directly linked to the three sources, and the company, therefore, deducts them from the gross profits to arrive at the loss from operations. The next item is a loss before income tax, which is obtained by adding the income interest to the loss from operations and subtracting interest expenses. The company then provides for income taxes and end up getting the net loss. It then adds net losses that can be attributed to non controlling interest and the financial amount is the net loss that can be attributed to Tesla shareholders.
Income statements can be prepared using two approaches; single step and multi-step. The first option offers a simplified report of the profits. The revenues and gains are added together, and then the expenses and losses deducted. A multi-step, on the other hand, uses multiple equations to determine the profitability of the company.
A company should report its operating activities throughout the year and use such information to compute its income. The revenues from operating and non-operating activities for the period should be determined, and any associated costs deducted to determine the profits or losses of a company. Similarly, income taxes should be deducted to arrive at the profits or loss.
The specific items of the income statements should be reported independently to ensure that they are neither under nor overstated. Care must be taken while recording to avoid declaring higher profits than the actual value since it can lead to over taxation. They must record all the subcategories of each item. The computations of each element must be done carefully. Otherwise, it will affect the entire income statement.
