For bookkeeper, it is important to understand that there are a few ways of preparing the format of an Income statement. Basically, there are two formats namely the Single Step Format and Multiple-Step Income Statement.
Below are the format for both the Single step and Multiple-Step Format of Income Statement. Also mentioned are their advantages and disadvantages.
Format of A 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 |
Format of A 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 |
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
As for the single step format of Income Statement, the advantage 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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- Income Statement(Part1of2)
- Snapshot of how to prepare the Income statement,Owner’s equity statement and Balance sheet statement
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