Question

What are the primary elements and totals found on a multi-step income statement? Why are these important?

Answer 1

Following are the primary elements and totals found on a multi step income statement

A	SALES			XXXXXXX
B	COST OF GOODS SOLD			XXXXXXX
C(A-B)	GROSS PROFIT			XXXXXXX
D	OPERATING EXPENSES
		SELLING EXPENSES
			ADVERTISING EXPENSES	XXXX
			COMMISSION EXPENSES	XXXX
		ADMINSTRATIVE EXPENSES
			OFFICE SUPPLIES EXPENSE	XXXX
			OFFICE EQUIPMENT EXPENSE	XXXX
D	TOTAL OPERATING EXPENSES			XXXX
E=C-D	OPERATING INCOME			XXXX
F	NON OPERATING OR OTHER INCOME
		INTEREST REVENUES		XXXX
		GAIN ON SALE OF INVESTMENTS		XXXX
F	TOTAL NON OPERATING INCOME			XXXX
G=E+F	NET INCOME			XXXXX

Reason for its important:

1. Above each element are broadly categorized in operation income, operaton expenses, non operation income and non operational expenses.

2. Thus to know the business income we deduct operational expenses from Operation income. i.e, Sales- cost of gooods sold- operatonal expenses.

3. Similary after getting operating income we add other non business income to it to arrive Net income earned during the year.