Here you can find example Income Statement which is provided in a multiple step format.
When this format is used, revenues and expenses of a business are grouped into certain groups and are disclosed separately.
1. Income Statement starts from Sales Revenue, which amounts to 4395 $.
This caption represents revenue for the goods sold or services provided during a given period of time.
2. Then Cost of Goods Sold is provided. It amounts to 2541 $.
This caption represents expenses directly related to the goods sold or services provided during a given period of time.
3. Difference between these two captions amounting to 1854 $ is called Gross Profit.
This is a margin the business is able to generate selling goods or providing services. It is estimated without taking into account selling, general and administrative expenses.
4. These expenses are provided below Gross Profit and amount to 389 $.
5. Difference between Gross Profit and mentioned expenses is called Operating profit. It can be also called Earnings Before Interest and Tax or EBIT.
It amounts to 1465 $.
6. The Income Statement provides interest expenses, which represent financing cost of the business. It amounts to 7 $.
7. If we deduct interest expenses from Operating profit we will get Earning Before taxes or EBT.
8. The last caption on the Income Statement is Income taxes amounting to 641$.
9. And then Net Income is presented. It amounts to 817 $.
As already said EBIT or Operating profit represents earnings before interest and taxes. This amount is not affected by how business is financed, i.e. by debt or equity.
Interest expenses are tax deductible. This means that operating profit is reduced by interest expenses and taxes are calculated on the remaining amount.
Bear in mind that Profit does not equal to Cash generated by the business for a given period of time. It is due to the accrual basis principle applied. This means that Income Statement includes revenues recognized. However cash might not yet be received for the goods sold or services provided. Income Statement might also include expenses which are recognized despite that cash will be paid later.
Multiple Step Income Statement Format
Income Statement Template depends on which type of this statement we select. There are two basic types:
Single step – such statement has only two groupings: Revenues and Expenses. Net profit or loss is calculated by deducting from total Revenue amount total Expenses amount. Revenues and Expenses from all the activities of the entity are not separated
Multiple step – such statement separates results from different activities and provided different classes of expenses. In this statement we will have Sales Revenue, Cost of Goods Sold, Gross Profit, Selling & Administrative Expenses or Operating Expenses and other separately disclosed items.
Let us learn more about the structure of Income Statement Sample.
Income Statement measures Profit generated by the business. The measurement is done for a given period of time. Therefore Income Statement reflects result of business operations for a period. Period can cover month, quarter or a year.
One type of the Income Statement template is called – Multiple Step Income Statement. Such statement includes separate groups of Revenues and Expenses.
When we analyze Multiple Step Income Statement we will see there the following:
- Revenues. This caption will include money earned from selling goods or services
- Cost of gods sold. This caption will include cost of goods sold. These are expenses directly related to the goods sold or services provided during the period.
- Operating Expenses. This caption includes expenses related to marketing and distributing the gods or providing services. This caption also includes expenses related to the administration of the business.
- Financing costs. This caption includes interest paid to creditors for money used. Also preferred stock dividends are included into this caption.
- Income Taxes. This caption includes taxes paid on profit. Of course if business is profitable for a given period of time.
So you can see that Income Statement Sample – Multiple Step Format provides plenty of details on revenues earned and expenses incurred by the business.
One More Sample Income Statement
So after covering all the items which can be found on the Income Statement, below you can find Sample Income Statement with explanations.