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Easy to Read: The single-step income statement is a streamlined document.Easy to Prepare: Because single-step income statements require you to make fewer calculations and because they don’t break down operating versus non-operating line items, single-step reports take less time and effort to prepare.Advantages of Single-Step Income Statements Single-Step vs Multi-Step Income StatementĪ single-step income statement gives a simple accounting of a business’s net income, whereas a multi-step income statement follows a three-step process to calculate net income, separating operational from non-operational revenues and expenses. This final figure gives the net income or net loss of the business for the reporting period. Operating income is added to the net non-operating revenues, gains, expenses and losses. Net Income = Operating Income + Non-operating Items

Operating expenses are subtracted from gross profit. Operating Income = Gross Profit - Operating Expenses Gross Profit = Net Sales - Cost of Goods SoldĬost of goods sold is subtracted from net sales. The multi-step income statement uses three different accounting formulas to arrive at the net income: 1. This separates revenues and expenses that are directly related to the business’s operations from those that are not directly tied to its operations. The multi-step income statement breaks down operating revenues and operating expenses versus non-operating revenues and non-operating expenses. What’s a Multi-Step Income Statement?Ī multi-step income statement reports much of the same general information included in a single-step income statement, but it uses multiple equations to determine the net income, or profit, of the company.

It’s easy to understand and relatively easy to prepare. The single-step income statement offers a straightforward accounting of the financial activity of your business. Net Income = (Revenues + Gains) - (Expenses + Losses) The equation used in a single-step income statement is: What’s a Single-Step Income Statement?Ī single-step income statement presents the revenue, expenses and ultimately the profit or loss generated by a business, but it reports on this information by using just one equation to calculate profits. If you need income tax advice please contact an accountant in your area. NOTE: FreshBooks Support team members are not certified income tax or accounting professionals and cannot provide advice in these areas, outside of supporting questions about FreshBooks. Should I Prepare a Single-Step or Multi-Step Income Statement? Single-Step vs Multi-Step Income Statement Income statements, also called profit and loss statements, are one of the major financial statements prepared by businesses.Įxplore these topics to discover the key differences between a single-step vs multi-step income statement: A multi-step income statement, on the other hand, separates operational revenues and expenses from non-operational ones and follows a three-step process to calculate net income. Both single-step and multi-step income statements report on the revenues, expenses and the profit or loss of a business during a specific reporting period.Ī single-step income statement offers a simple report of a business’s profit, using a single equation to calculate net income. The format you choose depends on the type of business you own and the ultimate purpose of the income statement you’re creating. Small businesses have two reporting options when preparing an income statement: you can create a single-step income statement or a multi-step income statement.