Income Statement Example And The Single Step & Multiple Step Income Statement

November 6th, 2009 Comments off
Share |

Question:

What is Single Step Income Statement and Multiple Step Income Statement, and what are the advantages and disadvantages of using them.

Answer:

Basically, there are two format namely the Single Step Format and Multiple-Step Income Statement.

Single Step Income Statement Example is as follows:

Single Step Income Statement

 

$

Revenues

 

Net Sales

180,000

Gains

10,000

Total revenues

190,000

Expenses

 

Cost of goods sold

55,000

Selling and administrative expenses

24,000

Interest expenses

10,000

Losses

8,000

Income tax expenses

15,000

Total expenses

112,000

Net Income

78,000

 

Multiple Step Income Statement Example is as follows:

Multiple Step Income Statement

 

$

Net Sales

180,000

Cost of goods sold

55,000

Gross Profit

125,000

Selling and administrative expenses

24,000

Operating Profit

101,000

Other revenues and gains

10,000

Other expense and losses

18,000

Pretax income from continuing operations

93,000

Income tax expenses

15,000

Net Income

78,000

Salient points to note:

Whether you use the Single Format Income Statement or Multiple Step Income Statement, you will still get the end result/bottom line re: same net income.

The advantages of using the multiple step income statement format are:

  • It clearly display important financial and managerial information
  • the four measures of profitability are revealed at four critical areas of a company’s operation namely gross profit, operating profit/operating income, pretax income and after tax net income

The advantage of the single step format of Income Statement, is that is relatively simple to prepared and understand however, the gross and operating income figures are not stated which need to be computed.

Comments are closed now.

Financial Accounting

 
 

Advertise Here | Brain Teasers/Puzzles | Greeting Cards | Inspirational Quotes | Jokes/Humor | Useful Links | Motivational Stories | Resource | Shopping | Share/Express Your Views | Testimonials | Universities/Colleges | Words of Wisdom from Religions | FREE POSTING OF ACCOUNTING & FINANCE JOBS VACANCY|