Question

A primary advantage of the multiple-step format of the income statement over the single-step format is that the multiple-step format: Multiple Choice a. classifies expenses by function. b. results in a higher amount of net income. c. separately lists income tax expense. d. lists revenues and expenses in order of their dollar amount.

Answer 1

Answer:

a. classifies expenses by function.

Explanation:

Multiple step format of income statement has the distinction of classifying expenses based on function as direct cost (non operational cost) and indirect cost ( operational cost).

Direct cost is cost that can be directly traced to the product like cost of raw materials.

Indirect cost is not directly linked to the product and includes salaries, rent, marketing cost, research and development, accounting fees, and legal fees.

Single step format on the other hand does not divide expenses based on function, but states the simplified revenue and expense of a business.