Does Gross Profit Appear on a Single-Step Income Statement?
Overview
An income statement is a financial document that summarizes a company’s financial performance over a specific period, typically a quarter or a year. There are two main types of income statements: single-step and multi-step. Gross profit, which is calculated by subtracting the cost of goods sold from net sales, is a key financial metric that can be found on both types of income statements.
Gross Profit on a Single-Step Income Statement
In a single-step income statement, all revenues and expenses are listed in a single step, with the gross profit calculated as part of this process. The formula for calculating gross profit on a single-step income statement is as follows:
- Gross Profit = Net Sales – Cost of Goods Sold
Once the gross profit is calculated, it is added to other revenues and subtracted from total expenses to arrive at the net income for the period.
Single-Step vs. Multi-Step Income Statement
The key difference between a single-step and a multi-step income statement lies in how the gross profit is calculated. In a multi-step income statement, the gross profit is calculated as a separate line item before other expenses are subtracted. The gross profit is then added to other revenues and subtracted from total expenses to arrive at the net income.
| Single-Step | Multi-Step | |
|---|---|---|
| Net Sales | Included | Included |
| Cost of Goods Sold | Subtracted from Net Sales | Subtracted from Net Sales |
| Gross Profit | Calculated as part of the process | Separate line item |
| Operating Expenses | Subtracted from Gross Profit | Subtracted from Gross Profit |
| Other Revenues | Added to Gross Profit | Added to Gross Profit |
| Other Expenses | Subtracted from Total | Subtracted from Total |
| Net Income | Calculated by subtracting total expenses from total revenues | Calculated by subtracting total expenses from total revenues |
Conclusion
Gross profit is a key financial metric that appears on both single-step and multi-step income statements. In a single-step income statement, the gross profit is calculated by subtracting the cost of goods sold from net sales. In a multi-step income statement, the gross profit is calculated as a separate line item before other expenses are subtracted.
Also Read: What Do The 3 Diamonds On The Steelers Hat Represent
Recommend: How To Start A Novel
Related Posts: How Many Digits In A Checking Account Number
Also Read: How Do You Split Your Screen On A Chromebook
Recommend: Is Farmers Union Greek Yogurt Good For You