In this, we use a single equation to come up with the profit or loss. We total all revenues and expenses and subtract them from each other to get the net income. https://efinancemanagement.com/financial-accounting/multi-step-vs-single-step-income-statement

1. By:-
eFinanceManagement.com
https://efinancemanagement.com/financial-accounting/multi-step-vs-single-step-income-
statement
Multi-Step vs Single-Step Income
Statement

2. 1. Meaning
2. Advantages
3. Disadvantages
4. Which should one Use?
5. Reference
Content

3. 1. Single-Step Income Statement:
In this, we use a single equation to come up with the profit or loss. We total all revenues and expenses and subtract them
from each other to get the net income. This method uses the following equation:
Net Income (or Loss) = (Revenues + Gains) – (Expenses + Losses)
2. Multi-Step Income Statement:
In such a structure, a specific segregation/split is made between the revenue and expenses on the basis of whether they
belong to the operational and non-operational stream. Under this method, there are three steps to calculate the net
income or loss for a company. Basically, it uses three equations to come up with the net profit or loss for a business:
1. Gross Profit = Net Sales – COGS (cost of goods sold)
2.Operating Income = Gross Profit – Operating Expenses
3.Net Income = Operating Income + Non-Operating Items
Meaning

4. Advantages of Single-Step Income Statement:
• Easy to prepare
• Easy to read
Advantages of Multi-Step Income Statement:
• More details
• Help in finding GP
• Helps in finding operating income
Advantages

5. Disadvantages of Single-Step Income Statement:
• May not give enough information to the investors
• Unable to present true financial health of a company
• Investors may not put their funds in a company that does not reveal all the information
• Difficult for the operating management to take the right corrective actions
Disadvantages of Single-Step Income Statement:
• Takes time and effort
• Requires each item to be categorized, there are more likely to be wrong classification and grouping errors
• Any mistake may result in investors making wrong assumptions about the business
Disadvantages

6. If your business is small, or you operate via sole-proprietorships and partnerships, then you can go for either of the two
methods. But, if your business is big, or the number of transactions is large, then you must go for the multi-step income
statement.
Which should One Use?

7. Reference
To know more about it, click on the link given below:
https://efinancemanagement.com/financial-accounting/multi-step-vs-single-step-income-statement