Formats of Income Statements

For example, if the entity is used as construction services, the revenues from the contractions contracts with its customers are considered the operating revenues. The following example shows the format of a single-step income statement. An income statement can be presented in a single-step format or multi-step format. Other income, non-operating income, or other income might imply the same kind of income that the entity is generating from its main operation. For example, some revenues from the main operation are also included here.

It shows cost of goods sold as a subtraction from net sales to determine the subtotal cost of goods sold.

Also, some companies (even some huge ones) present it as part of their annual accounts with other statements in detail. Hence, the person who wants the data to be presented in this form can also have it. The single-step format is not heavily used, because it forces the readers of an income statement to separately summarize subsets of information within the income statement. For example, there is no gross margin calculation, nor any expense breakdowns by department.

Non operating expenses:

Single-step income statement is one of the two commonly used income statement formats, the other being the multi-step income statement. The net income calculated using the single-step income statement is equal to that which is calculated using a multi-step income statement. However, this format could miss leading users of income statements, especially for non-accounting experiences users, because this format treats all kinds of revenues into only one section. The users of income statements might also miss understanding about expenses being present as they are all treated in the same section, whether they are operational or nonoperational expenses.

In multi-step format, there are multiple groups for expenses, such as cost of goods sold, operating expenses, and other expenses. We will see gross profits as well as net profits in the multi-step format. The income statement presented earlier for Innovative Products Inc. was in multi-step format. The following is another example of multi-step format income statement. An income statement is an accounting document that summarizes the net profit or loss of a company by subtracting the expenses from the income.

The key element of the Single Step Income Statement

• For example, some revenues from the main operation are also included here.
• And it could lead users to misunderstand that entity performance becomes better in that period.
• In some periods, those non-operating revenues like sales of non-current assets could be larges.

In a single-step income statement, the operating revenues are recorded in the revenues section, including other income. For example, the revenue section records all types of revenues no matter those revenues are from the operation or non-operation. For example, interest income, revaluation gain, or gain on sales of assets. All types of expenses are recorded under this section and subtotal into one line in the expenses section.

It shows only one total for all expenses.

This is because this revenue is generated from its main operating activities. Therefore net income is $184,400, which will give a general idea that the company is making a surplus of money. I.e., we cannot determine gross margins or prospects just after the perusal of this statement. It would require much effort if one wants to know that aspect of the company.

This makes it more difficult for users to extract useful information from an income statement. This is a particular concern for a larger and more complex organization, which has many departments and expenses. In some periods, those non-operating revenues like sales of non-current assets could be larges. And it could lead users to misunderstand that entity performance becomes better in that period.

A single-step income statement can be identified by which of the following formats?

A major drawback of single-step income statement is that it does not calculate the gross profit of a business. However, the company might generate some interest income that it deposits in the banks. This kind of income is not considered as revenues or operating revenues.

The single-step income statement is the format used to prepare an income statement where revenues, expenses, and net income are presented into a single subtotal. For a more readable format, try the multi-step format, which is the format of choice for larger and multi-department organizations. Smaller businesses may start reporting their financial results with a single-step income statement and then switch to the multi-step format once their operations become larger and more complex. The single-step income statement is best suitable for organizations and individuals who are not very humongous in size. Also, if they require the presentation of information in a simple manner. However, managers use this method of reporting for internal use in single departments and company divisions to analyze a company’s performance and set the budget for future periods.

A single step income statement is a format of income statement, which uses just a single subtraction i.e. the total of all revenues, incomes, and gains minus the total of all expenses and losses. Operating expenses and non-operating expenses are recorded in the expenses all together in the single-step income statement. The expenses usually recorded in this section include salary expenses, sales, advertising expenses, sales expenses, administrative expenses, and office supplies expenses.

• For example, there is no gross margin calculation, nor any expense breakdowns by department.
• It would require much effort if one wants to know that aspect of the company.
• We will see gross profits as well as net profits in the multi-step format.
• These expenses are recorded in the expenses section with other operating expenses of a single-step income statement.
• Also, if they require the presentation of information in a simple manner.
• For example, the revenue section records all types of revenues no matter those revenues are from the operation or non-operation.

Other items that generally have the other income include the entity’s income from sales of fixed assets or other one-off income-generating activities. In a single-step income statement, the other incomes are recorded in the revenues section with the main revenues that the entity is generating in the period. The single-step income statement presents information in a simplified format. It uses a single subtotal for all revenue line items and a single subtotal for all expense line items, with a net profit or loss appearing at the bottom of the report.

This format is most commonly used by businesses that have relatively simple operations, with few line items reported. It is most commonly produced by lower-end accounting software packages. Non-operating expenses are the expenses that are non-related to the entity’s daily operation. For example, interest expenses and other expenses that spend by the entity like selling of fixed assets. These expenses are recorded in the expenses section with other operating expenses of a single-step income statement.

The difference between these two sections creates another net loss or profit section. In single-step format, all revenues are grouped together and all expenses are grouped together. Operating revenues are the revenues that an entity generates from its normal business activities.

The excellent point about this format is that users are straightforward in understanding the entity’s income and expenses for the period being shown. The single-step income statement a single-step income statement can be identified by which of the following formats? is not popularly used by an entity to prepare and present its income statement. This formal is easy for users of financial statements as it provide the simple presentation of income and expenses that occurred in the entity. Those expenses include the cost of goods sold, operating expenses, and loss on revaluation.