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

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.

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