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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