Question

How does the single-step form of the income statement differ from the multiple-step form?

Answer 1

In single step income statement, total expenses are subtracted from total revenues to determine net income. No classification is done for either expenses or revenues. Separate figures of gross profit and operating profits are not available in the single step income statement.

In multiple step income statement, both revenues and expenses are classified. First of all, Gross profit is calculated by subtracting cost of goods sold from sales. Then operating profit is calculated by subtracting operating expenses from the gross profit. And finally all other non operating revenues and expenses are considered to find out net income.

Single step income statement

Revenues
Net sales
Interest revenue
Gain on sale of plant
Other revenues
Total revenues
Expenses
Cost of goods sold
Selling expenses
Administrative expenses
Total expenses
Net income (I – II)

Multiple step income statement

Sales
Cost of goods sold:
Beginning merchandise inventory
+ Purchases of merchandise inventory
- Ending merchandise inventory
Gross profit
Operating expenses
Income from operations
Other revenues
Other expenses and losses
Income before income tax
Income tax expense
Income before irregular items
Discontinued operations
Extraordinary items
Net income
Unrealized gain/loss on available for sale securities
Comprehensive income

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