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Content What Is a Single-Step Income Statement? Advantages of Single-Step Income Statements Single-Step Income Statement Example What are the two types of income statements? Create a Free Account and Ask Any Financial Question Why You Can Trust Finance Strategists The Definition of Total Revenue Net Loss A Multi-Step Income Statement can be used to analyze company performance and allow for a more detailed analysis compared to a single-step income statement. Yet, a single-step income statement could still provide all of the information a small business would need to see how it is doing. It separates the revenues and expenses into two different categories, one for those that are a direct part of the company’s operations and the other for those that are not directly related to the company’s operations. Multi-Step Income Statements take more time than single-step income statements, however, they give the company evaluating them an advantage when it comes to finding trends in the data being represented. Add the operating income to the net non-operating expenses and losses as well as the gains and revenues to obtain the net income or loss. A single-step income statement lists the revenue and expenses and uses this information to calculate the net income or net loss. In contrast, a multi-step income statement uses three steps to compute the net income and separates the non-operational and operational revenues and expenses. Multi-step statements are more detailed and segmented according to types of income and expenses, which show how a business progresses toward net income, or in some cases a net loss. A single-step format is a quick rundown of a business’s activity, almost a back-of-the-envelope calculation. What Is a Single-Step Income Statement? The revenue category will come first or right at the top and there is only one subtotal for each category. All the revenues including service revenue, consulting fees, investment income, etc. will be listed together under this one. † To check the rates and terms you qualify for, one or more soft credit pulls will be done by SuperMoney, and/or SuperMoney’s lending partners, that will not affect your credit score. We endeavor to ensure that the information on this site is current and accurate but you should confirm any information with the product or service provider and read the information they can provide. Read more about the differences between gross profit and net income in this SuperMoney article. Multi-Step Income Statements are useful for clarity and ease of reporting information at different levels. Throughout this series of financial statements, you can download the Excel template below for free to see how Bob’s Donut Shoppe uses the income statement (and others) to evaluate the performance of his business. A financial professional will offer guidance based on the information provided and offer a no-obligation call to better understand your situation. The Multi-Step Income Statement is more comprehensive and easier to understand. Advantages of Single-Step Income Statements It cuts right to the chase by showing the business’s net income without any intermediate steps, such as gross profit or operating profit. Reading a single-step statement requires little financial background, just an ability to look down a short list of numbers for net income. A single-step income statement is a summary of a business’s profitability that uses one calculation to arrive single step income statement vs multiple step at net income before taxes—hence the single step. It groups all revenue together regardless of the source and does the same for expenses. A single-step income statement focuses on revenue, expenses, and the profit or loss of a business. A single-step income statement offers a simple accounting method for the financial activity of a business, making it easy to prepare and understand. It is used by summarizing the aspects that are important to each organization or purpose for producing a Multi-Level Income Statement. Hopefully, this article will help you choose the best way to make an income statement for your business. https://personal-accounting.org/how-to-calculate-net-assets-in-statement-of/ Finance Strategists is a leading financial education organization that connects people with financial professionals, priding itself on providing accurate and reliable financial information to millions of readers each year. Single-Step Income Statement Example While the single-step format is not cluttered with multiple subtotals, it requires the reader to compute the gross profit and operating income from the amounts listed. A small business that has a simple operating structure, such as partnerships or sole proprietorships, could use either single-step or multi-step income statements. A single-step income statement may break down the sources of revenue and expenses, as the following example shows, but it doesn’t go into too much detail. Also, notice how the statement is clearly split into two areas — revenue and gains on the top, and expenses and losses on the bottom. A single-step statement doesn’t provide details about how a company earned a profit and offers little insight into a business’s financial health. Knowing more about production costs or overhead could help to identify possible cost reductions to boost profit. A multi-step income statement helps to give an insight into gross profit, how a business uses labor and supplies to generate revenue. On the other hand, some investors may find single-step income statements to be too thin on information. They would benefit from this type of statement because they can see a more detailed representation of their operations. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services.