Question

A company prepares its income statement by listing all sources of revenues and gains at the top, followed by a list of all expenses and losses. Which income statement approach does this describe

Answer 1

Answer:

Single step income statement

Explanation:

The single step income statement is the simplest form in which an income statement is prepared, e.g.

Revenues:

• Sales revenues $100
• Interest income $20               $120

Expenses:

• Rent expense $30
• Utilities expense $10
• Wages and salaries $60       ($100)

Income before taxes                         $20

Tax expenses                               ($4.20)

Net income                                   $15.80

A multi-step income statement is more complex, since operating revenues and costs are reported first in order to determine operating income, then other revenues and expenses are introduced and income before taxes is calculated.