With an easy and single format, business owners can make their income statement to record expenses or costs and revenue in a single column. Expenses or goods cost recorded in a single line after breakable into different categories that do not require two columns to prepare a profit and loss statement. If you face difficulties preparing a double-step income statement or multi-step income statement, you can move with a single-step income statement which can be easily prepared, recorded items, and shown to the owners. A single-step income statement can cover multiple expenses or good production costs under a single table. Mainly small-scale businesses and medium-scale businesses use the single-step format to provide expense details that are incurred in the business operations with simplicity and clarity.
Why is a single-step income statement more preferable?
Due to its simplicity, show each expense and costs all together with an amount with the motive of calculating together and get a total amount at the end of the statement that represents total expenses or cost in dollars. It is used more because it is the cheapest and quickest procedure to make an income statement that does not include complexity and more time to develop a listing of expenses in a series.
The purpose of this statement is to provide internal information, not for analysts who come from outside to check your performance and set business budget ideas to follow sincerely. This statement is only for the company’s hired analysts who check the status of expenses on a daily basis but not for outer analysts who judge your company’s performance by comparing with competitors performance, they all set to find over expenses or non-required expenses for performing a duty. They find those companies who get success by doing less expenses and making your goods valuable and expensive in the same industry. For the outer analysts, company’s use to prepare a multi-step income statement to combine expenses to explain in a brief together.
Benefits of a single-step income statement
- The single-step income statement provides relevant information with a simplicity that finds everyone in accounting.
- Analysts do not need to go into a deep to summarize all expenses to check out due to the used basic format. Even company members don’t need to require an accountant specialist to take out the meaning.
- It contains general information without performing a deep analysis.
- The single-step income statement tries to make columns and figures easier, it reduces the workload of accountants. Accurate information with a lack of complications shows clarity in reading revenue and expenses that are helpful to make further decisions.
- It is the most-commonly used method to give conclusions from statements such as gross margin, expenses, revenue in different categories like selling expenses, administrative expenses, and cost of goods sold.
- It is suitable for small to medium-scale organizations which have fewer activities to conduct.
- The Presentation of the income statement looks simple and understandable which helps to measure total expense and total revenue to calculate net income.
- With a single-step income statement, an accountant can easily make further financial statements like a balance sheet.
Easy format of a single-step income statement
The format is easy, you won’t mix up even get an accurate result from it. As you know, this statement contains two categories ie. revenue and expense which have multiple varieties to compute that can be described easily after preparing a single-step income statement. Such as revenue section includes sales + interest + gain on sale of assets + fee earned and expenses include office expense (like stationary tools cost + refreshment cost + bills exp. + services) + depreciation exp. + wages and salaries + transportation expense, both sections are recorded in a single column to calculate as expenses are deducted from revenue to get net income. It’s just an idea for you how to get net income through a single-step statement.
After getting the information from the above article, we hope you can understand why a single-step income statement is a more easy method to calculate net income for small to medium-scale organizations. It’s just a basic formula to generate business net income after deducting total expenses and losses from total revenue. It is fit for those companies who do not want to face difficulties while reading a statement that does not combine operating and non-operating amounts.