Formatting an Income Statement for a Business

Before you actually create your business’s income statement, you have to pick a format in which to organize your financial information. You have two options to choose from: the single-step format or the multi-step format. They contain the same information but present it in slightly different ways.

The single-step format groups all data into two categories: revenue and expenses. The multi-step format divides the income statement into several sections and gives the reader some key subtotals to make analyzing the data easier.

The single-step format allows readers to calculate the same subtotals as appear in the multi-step format, but those calculations mean more work for the reader. Therefore, most businesses choose the multi-step format to simplify income statement analysis for their financial report readers.

The following is an example of a basic income statement prepared in the single-step format:

Revenues
Net Sales $1,000
Interest Income 100
Total Revenue $1,100
 
Expenses
Costs of Goods Sold             $500
Depreciation 50
Advertising 50
Salaries 100
Supplies 100
Interest Expenses 50
Total Expenses $850
Net Income $250

The following is an example of a basic income statement prepared in the multi-step format:

Revenues
Sales $1,000
Cost of Goods Sold $500
Gross Profit $500
 
Operating Expenses
Depreciation $50
Advertising 50
Salaries 100
Supplies 100
Interest Expenses 50
     Total Operating Expenses $350
     Operating Income $150
   
Other Income
     Interest Income $100
     Total Income $250

 

 

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