A single-step Income Statement is based on the simple representation of net income. This is done by subtracting expenses and losses from revenues and gains to get Net Income. It can be formalized as
Net Income= (Revenues and Gains) — (Expenses and losses)
A single step Income statement includes:
Note:- The extraordinary gains and Losses are noted under Discountinued operation as per the guidelines of FASB.
Let’s evaluate each component of the Single-step Income statement.
1. Total Revenues:
Here the Total revenues is a calculated Sum of net sales and other operational revenues.
Net sales are calculated as
Net sales and Other revenues and gains are summed up to get Total revenues. This single sum is then put into a Single-step income statement
2. Total Expenses:
Total expenses here is calculated as a sum of all the expenses the company had during that financial period. It includes COGS also known as Product cost, Operating Income, and Other Expenses and losses. The total expenses are calculated as followed and then put into the income statement.
3. Income from Continuing operations(Gross)
Total expenses are deducted from the total revenues to get the gross amount of income from continuing operations. These represent the Gross income amount of a company dealing in products or services without taxes.
4. Income tax expense
After getting the value of income from continuing operations we apply the taxes. The taxes are deducted to get Income from continuing operations net of taxes.
Here the tax expenses are the sum of current and deferred. Both are explained separately in current taxes and Deferred taxes.
Rest components are the same as the multiple-step income statement. Like after getting income from continuing operations (net of taxes). Gains and losses from discontinued operations are added or subtracted as required to get Net Income.
Net Income is the final step of the statement of Earning.
Comprehensive Income Statement
The other comprehensive income is added to the net income to get a Comprehensive Income Statement.
Read more about: Comprehensive income
The multiple-step income statement is preferred by companies because it gives detailed information about income as well as expenses.
Read more about: Multiple step Income statement || Deferred taxes || Net income|| COGS || Operating Expenses
