Resolved: You did not deducted the operating expenses(SG&A) from the net revenue to calculate the Net Income?

Question

Please mention which stage you deduct the operating expenses(SG&A)?

Answer 1

Hi,

It is a standard practice that you deduct SG&A expenses from Gross Profit.

However, there is a tricky part here, as there are two P&L formats - by function and by nature.

As we do not touch on this in the lesson, you can read more about it here:

The idea is that SG&A expenses appear only in a P&L by function format, while we examine a P&L by nature format in this lesson.

This is the reason why you don't see SG&A in the P&L. Yet, it is important for you to know that such type of expense classification exists.

I hope this helps. Please let us know if you have any other questions.

Best,

The 365 Team

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