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:
|Costs of Goods Sold||$500|
The following is an example of a basic income statement prepared in the multi-step format:
|Cost of Goods Sold||$500|
|Total Operating Expenses||$350|