A single-step income statement is a straightforward financial document that summarizes a company's revenues and expenses to determine net income. The structure is simple: first, list all revenues, then all expenses, and finally calculate net income using the formula:
Net Income = Total Revenues - Total Expenses
To create a single-step income statement, begin by identifying all revenue sources. For instance, if a company has sales revenue of $300,000 and service revenue of $18,000, these figures are recorded as:
Sales Revenue: $300,000
Service Revenue: $18,000
Next, calculate total revenues by adding these amounts together:
Total Revenues = $300,000 + $18,000 = $318,000
After establishing total revenues, the next step is to list all expenses. Common expenses include wage expense, interest expense, cost of goods sold (COGS), income tax expense, and other general and administrative expenses. For example:
Wage Expense: $35,000
Interest Expense: $6,000
Cost of Goods Sold: $180,000
Income Tax Expense: $12,000
Other Expenses: $48,000
To find total expenses, sum these amounts:
Total Expenses = $35,000 + $6,000 + $180,000 + $12,000 + $48,000 = $281,000
Finally, calculate net income by subtracting total expenses from total revenues:
Net Income = $318,000 - $281,000 = $37,000
This process illustrates the simplicity of the single-step income statement, which effectively communicates a company's financial performance by clearly delineating revenues and expenses, culminating in the net income figure. Understanding this format is essential for analyzing financial health and making informed business decisions.
