Question

What are the two formats for preparing the business income statement

Answer 1

The two formats, or methods, for preparing the business income statement are single-step and multi-step. The single-step method reports revenues in one section and expenses in another. It is easy to comprehend, but it is not very detailed. Investors may be turned off by the difficulty in determining where a company's income is coming from, which will affect their decision to invest capital in the company.

The multi-step method states revenues and expenses in more distinct categories. It separates things like operating revenues and expenses from non-operating revenues and expenses. This structured statement gives investors a better look at a business's point of profitability, its weaknesses, and whether it is operating efficiently.

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