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Just Other Articles - Accounting - Explaining The Income Statement
In layman’s terms, what is the income statement? We will look at the various components of the income statement: revenues, cost of goods sold, expenses and net income. Income statements are helpful, because they will give you some history of
According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product
the business in order to budget for future operations and assess risk of future cash flows. An income statement is also known as a profit-and-loss statement.
The nature of the income statement is that it is a reflection of operations over a p
The nature of the income statement is that it is a reflection of operations over a p
; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.
Examples of combination products may in
Examples of combination products may in
riod of time, i.e., “for the month ended June 30, 2006”, or “for the year ended December 31, 2006”. This is different from the balance sheet, which reflects a certain point in time. Income statements contain what is known as “temporary” accoun
lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.
s and the balance sheet contains “permanent” accounts. Temporary accounts such as sales revenues and expenses are “closed out”, net income/loss is determined and this net amount ends up in an owner’s equity account. The accounts are closed at
here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe
the end of one period, reopened and reused for the next period.
The income statement is revenues less cost of goods sold, less expenses, equals the net income or loss. Revenues are the sales of items normally sold in your business; what are y
The income statement is revenues less cost of goods sold, less expenses, equals the net income or loss. Revenues are the sales of items normally sold in your business; what are y
d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.
Combination pro
Combination pro
u selling? Do you sell goods? Do you sell services? It is the selling price times the number of items sold. Sales are usually shown as net sales and some adjustment to sales would include sales discounts, sales returns and allowances.
If t
If t
ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc
he business sells goods, the next part of the income statement would be the cost of goods sold section. If the business sells services, it won’t have this section. Because this is such a large part of expenses for a retail establishment, whil
easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi
it is an expense, it is broken out separately from other expenses. The business will need to know how much inventory it started with and how much inventory it had during the end of the period. Additionally, it will need to know how much inve
nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
tory was purchased during the period. There are a number of ways to value inventory, such as Fifo (first in, first out), Lifo (last in, first out), average cost, specific identification, etc. Since we are taking a high-level glance at the inc
and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ
me statement, it is just important at this time to note that, because of subjectivity of inventory methods, this can be more of an art than a science. Beginning inventory plus goods purchased equals goods available for sale; goods available fo
ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
sale minus ending inventory will give you the cost of goods sold.
Expenses are outflows of cash necessary to the operation of the business. Some expenses are easily identified, such as rent or mortgage, utilities, office salaries, supplies,
Expenses are outflows of cash necessary to the operation of the business. Some expenses are easily identified, such as rent or mortgage, utilities, office salaries, supplies,
ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.
Following aspects would a
Following aspects would a
etc. and these are referred to as selling and administrative expenses. Selling expenses are costs related to selling goods, such as the salesperson’s salaries, shipping, freight, advertising, etc. Research and development costs are also valid
dd to the challenges in developing combination products:
Which markets to tap where the combination products can do fairly well?
Which combination prod
Which markets to tap where the combination products can do fairly well?
Which combination prod
expenses. If you own the building, vehicles, or equipment, there are depreciation costs. That just means if you own an asset that lasts for a couple of years, you can write off part of the cost of that asset as a depreciation expense for a ce
cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
tain number of years. Like inventory costs, there are a number of ways to subjectively determine depreciation, such as straight line, accelerated depreciation methods, etc. so there isn’t just one possible answer to determine depreciation cos
tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
s.
To determine net income or loss, you take revenues minus cost of goods sold minus expenses. If this number is positive, it is net income. If this number is negative, it is net loss. This amount is closed to an equity account, such as an
To determine net income or loss, you take revenues minus cost of goods sold minus expenses. If this number is positive, it is net income. If this number is negative, it is net loss. This amount is closed to an equity account, such as an
t?
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
wner’s capital account for a sole proprietorship or stockholder’s equity for a corporation.
Expenses and/or income outside the realm of usual business operations should be included in its own separate section. For example, the business is a s
Expenses and/or income outside the realm of usual business operations should be included in its own separate section. For example, the business is a s
ping new procedures for reviewing their safety, efficacy and quality.
Professional from academic institutions, pharmaceutical industries, health care indust
Professional from academic institutions, pharmaceutical industries, health care indust
hoe store and they sell one of their buildings or part of their vacant lot, which creates an inflow of money. This is not what you would expect a shoe store to do. In order to make income statements comparable by year, this special income wil
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
need to be shown in a separate section above net income.
So, at a high level we’ve looked at the income statement, defined the components of revenue, cost of goods sold, expenses and net income. We’ve pointed out areas such as inventory valu
So, at a high level we’ve looked at the income statement, defined the components of revenue, cost of goods sold, expenses and net income. We’ve pointed out areas such as inventory valu
.
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
tion and depreciation where different methods can be used which will determine different financial amounts. Businesses need to select their methods carefully and stick with them for consistency. It is not totally impossible to change these va
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.
Companies that provide selfless information through particip
Companies that provide selfless information through particip
uation methods, but it would require special disclosures, etc. Once we understand the basics of the income statement, it will help us understand income statements from a number of different companies, regardless of the nature of their business
tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products
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