You explain the basic format of the income statement to Alex. When he sells a meal or a drink in his restaurant, he receivesrevenues-- funds that flow into his business from the sale of goods or services.

On the income statement, he then needs to subtract the cost of revenues (or cost of goods sold) -- the cost to his restaurant of the food and beverages it sells.

When he subtracts the cost of revenues from revenues, the result is his gross profit.

He then needs to subtract his operating expenses. These are expenses incurred in running the restaurant, such as utilities, insurance, payroll, cleaning supplies, and the like.

Alex also needs to then subtract approximated taxes in order to arrive at his net income.