Question

Describe the added information provided in a multistep IS that is not included in a simple, single step IS. What advantage does the multistep have? What types of companies can make do with a simple IS and what types of companies need the multistep?

Answer 1

1.In multi step income statement more information is provided as compared to the single step statement. The multistep income statement provides the company's gross profits which the difference of the sales revenue and direct expenses and the net profit or operating profit which the difference between the gross profit and administrative expenses.

2. The multistep income statement provides more detailed information about the company's income statement. The information about the gross profit and operating profit and the sales of the company and the administrative expenses. The more detailed information provided the more benefits can have.

3. The small companies or sole proprietorship or partnership use the single step income statement and the large companies or tangible goods companies use the multistep income statement