Single-step Income Statement - Online Tutor, Practice Problems & Exam Prep

A single-step income statement presents a straightforward method for summarizing financial performance. It lists total revenues, such as sales revenue and service revenue, followed by total expenses, including wage expense, interest expense, and cost of goods sold. The net income is calculated using the equation: $\mathrm{Net}\mathrm{Income}=\mathrm{Total}\mathrm{Revenues}-\mathrm{Total}\mathrm{Expenses}$. This method is essential for understanding profitability within an accounting period.

Single-step Income Statement

Alright. So now let's form an income statement, and let's start with a really simple one, the single step income statement. So single step income statement, like I said, it's pretty simple. All we do is we're going to show all our revenues first, then all our expenses, and then finally calculate net income. Okay. So revenues minus expenses equals net income. This is a pretty standard equation that we're used to, so let's go ahead and just dive right in and let's create a single step income statement. Okay. So they gave us all this information for the month of November, right? We've got sales revenue, accounts payable, wage expense, interest expense, dividends, service revenue, cash collected from customers on account. So notice, those are our 2 revenue accounts, right? Cash collected from customers on account, this is collecting accounts receivable. That has nothing to do with revenue, right? So let's put in our revenue, sales revenue and service revenue. Sales revenue of $300,000, service revenue of $18,000. So we would write it in sales revenue and we would put over here $300,000. And then service revenue for $18,000. Right?

At this point, we could show a total total revenues. Right? And we would just add these up. We get $318,000. Alright. $318,000. Let me fix this 3 a little bit. Cool and then we just got to put all our expenses in here. So we've got a bunch of things, but let's just go 1 by 1. When we do a single step income statement, it's just get all the expenses in there. So I'm gonna circle them in blue. We have our wage expense, our interest expense. How about dividends? Dividends are not an expense, right? Dividends are not an expense. So wage expense, interest expense, cost of goods sold is an expense, income tax expense, and other general and administrative expenses. Notice, all of those say expense except for cost of goods sold. Right? Cost of goods sold is a special case, but it is an expense. Alright? So let's go ahead and go 1 by 1. Let's start wage expense $35,000 and I'm gonna put EXP to save time. Wage expense, $35,000. What's the next one? Interest expense for $6,000, and I'll put int expense. Just saving a little time. $6,000.

Alright. What's the next one? Cost of goods sold for $180,000. COGS was $180,000. Alright. Next one, income tax expense for $12,000. I'm just gonna put tax expense. What was it? $12,000 I think? Let me check. Yep. And then our last one, other general and administrative expenses $48,000. Okay. Just to save time. Obviously if we're really making a full one we would write all these things out right? So let's go ahead and get our total expenses here. So we just got to add all these up. Let's see. $35,000 plus $6,000 plus $180,000 plus $12,000 plus $48,000. Cool. That comes out to $281,000. And then the last thing is our net income. So net income is just going to be those total revenues minus total expenses. $318,000 minus $281,000 is $37,000. So $37,000 that is our bottom line and that is our net income. Cool?

So there you go, that is our single step income statement. Pretty straightforward, just show your revenues then show all your expenses, and calculate net income. Cool? Let's move on to the next video.

Here’s what students ask on this topic:

What is a single-step income statement?

A single-step income statement is a simplified financial statement that summarizes a company's revenues and expenses. It lists all revenues first, followed by all expenses, and then calculates the net income using the equation:

$\mathrm{Net}\mathrm{Income}=\mathrm{Total}\mathrm{Revenues}-\mathrm{Total}\mathrm{Expenses}$

This method is straightforward and helps in understanding the profitability of a company within an accounting period.

How do you calculate net income in a single-step income statement?

To calculate net income in a single-step income statement, you subtract total expenses from total revenues. The formula is:

$\mathrm{Net}\mathrm{Income}=\mathrm{Total}\mathrm{Revenues}-\mathrm{Total}\mathrm{Expenses}$

For example, if total revenues are $318,000 and total expenses are $281,000, the net income would be $37,000.

What are the components of a single-step income statement?

The components of a single-step income statement include:

• Total Revenues: This includes all revenue sources such as sales revenue and service revenue.
• Total Expenses: This includes all expenses such as wage expense, interest expense, cost of goods sold, and income tax expense.
• Net Income: This is calculated by subtracting total expenses from total revenues.

Why are dividends not included as an expense in a single-step income statement?

Dividends are not included as an expense in a single-step income statement because they are distributions of profit to shareholders, not costs incurred in generating revenue. Expenses are costs directly related to the operation of the business, such as wages, interest, and cost of goods sold. Dividends, on the other hand, are a way of sharing profits with shareholders and are recorded in the equity section of the balance sheet.

What is the difference between a single-step and a multi-step income statement?

A single-step income statement lists all revenues and expenses in one step to calculate net income, making it straightforward and easy to prepare. In contrast, a multi-step income statement separates operating revenues and expenses from non-operating ones, providing a more detailed view of a company's financial performance. The multi-step format includes subtotals like gross profit and operating income, offering more insights into different aspects of profitability.