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Explain about single step income statement in accounting with example.
Single step income statements represent company’s revenues, expenses and income in simple way. It is easy to calculate as not many steps are involved. Small companies, sole proprietorships uses this kind of statements often.
Formula
Net income = revenues – expenses
Advantages are given below −
- Firm prepares sing step income statement to analyse departmental performance in a period.
- Easy to prepare.
- Easy to analyse.
- Use for internal purpose.
Limitations are explained below −
- Chances of deviation of net income.
- Actual expenses are not known.
- Doesn’t calculate gross profit.
Example
The example is given below −
| Income statement of XYZ company As on 31st March xxxx | |
|---|---|
| Revenue and gains (A) | Rs. |
| Sales revenue | 150000 |
| Interest revenue | 25000 |
| Gain on sales of assets | 13000 |
| Total | 188000 |
| Expenses and losses | |
| Cost of goods sold | 80000 |
| Commissions expenses | 3000 |
| Office supplies expenses | 2500 |
| Office equipment expenses | 2000 |
| Advertising expenses | 2200 |
| Interest expenses | 800 |
| Loss from lawsuit | 1700 |
| Total (B) | 92200 |
| Net income | 95800 |
Net income = (revenue and gains) – (expenses and losses)
= 188000 – 92200
= 188000 – 92200
Updated on: 13-Aug-2020
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