Online Test Banks
Score higher
See Online Test Banks
eLearning
Learning anything is easy
Browse Online Courses
Mobile Apps
Learning on the go
Explore Mobile Apps
Dummies Store
Shop for books and more
Start Shopping

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

 

 

blog comments powered by Disqus
Advertisement

Inside Dummies.com

Dummies.com Sweepstakes

Win $500. Easy.