Question

Which of the following statements about the income statement is false? a. The single-step format groups all income items together, and then deducts all cost categories from the income. b. Discontinued operations and extraordinary transactions only appear on the multiple-step format of the income statement c. A common size income statement expresses each account item as a percentage of net sales d. The multiple-step format provides certain profit measures that are not included in the single-step format

Answer 1

Answer:

The statement which is false is D) .

Explanation:

Income statement helps in assessing the current and past performance of the company, it also helps in predicting the future performance and in assessing the risk present in future in obtaining cash flows. Income statement are prepared through two methods either single step format ( which is used by sole proprietor and partnership firms ) or multi step format ( used by corporations ) .

In the single step format , all the income items are group together and are subtracted from the total cost, while in multi step format , a company breaks all the sources from where the revenues and cost have come, it is used to take out various measures like gross profit, operating profit etc.

A common size statement is one of the type of income statement where each account item is represented as a percentage of total sales value.

Option D is false because discounted operations and extraordinary transactions appear on both the single step and multi step format , these transactions are written as written as footnote below the statement.