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I realize I'm kind of lumping an income statement and statement of cash flows together, but this is still the easier way of doing things for my particular use case.

I'm trying to do an income statement proforma. In the scenario that I'm modeling, revenues are positively effected because of a change in location. However, that change in location has costs (e.g., rent) that must be financed by a commercial loan. I'm trying to get a final monthly net profit figure, one that already incorporates the monthly debt repayment. For sake of example, let's use Month 1:

  • Revenue $100K
  • Rent $5K
  • Monthly loan repayment $3K (calculated based on loan terms), this consists of
    • $1K interest
    • $2K principal
  • All other costs = $80K

I'm trying to figure out how to account for the various costs without being redundant. It seems there are 2 ways of doing this:

METHOD A

Account for Rent and Interest, but NOT the principal payment since that is essentially what you've used to pay Rent. This seems to fit more in line with a standard income statement that has an interest line.

Revenue    100
Costs    -  80
Rent     -   5
Interest -   1
Net      =  14

METHOD B

Ignore Rent, but show the entirety of the monthly loan repayment. This is not very standard, but the benefit is that it clearly lays out the actual cash cost obligations. Because the received loan money is what is used to cover the rent, and revenues are used to cover repaying that loan.

Revenue    100
Costs    -  80
Repay    -   3
Net      =  17

Would LOVE some pro advice!

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  • Please see what is on topic for this site. Questions about accounting that are academic or have no bearing on personal finance are off-topic. Commented Sep 6, 2016 at 23:43
  • @ChrisW.Rea the example is a bit academic sorry, but this is totally for my personal finance... i'm trying to finance some office space for myself and trying to figure out what i will make each month...
    – james
    Commented Sep 6, 2016 at 23:45

1 Answer 1

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A few years late, and I'm sure you've figured it out yourself by now, but in general, you shouldn't include loan repayment amounts in an income statement--only interest. That said, I understand what you're trying to do here, so perhaps what you should be looking at is more of a cash flow-differential schedule. Remember also to include the effect on taxes of having higher revenues and higher interest.

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