What Is a Multi-Step Income Statement?
There are several ways a business can format their income statements, one of which is a multi-step income statement. Multiple step income statement definition  An income statement, also known as a profit and loss statement is required of every business when running their accounts. Most will opt for a single-step income statement, but you may also want to consider a multi-step income statement for greater clarity. A multiple step income statement is used to report the following:  Expenses  Revenues  Profit/loss  It provides more information than a single-step income statement, which can make it advantageous for your own records as well as any investors looking in. The main difference between a multi-step income statement and a single-step is that it separates the operating and non-operating costs of a business. This means that a multiple-step income statement gives detail into both the essential and non-essential activities of a company and how they have impacted one another. A multiple-step income statement also shows gross profit. How to prepare an income statement  In order to prepare a multi-step income statement, you will need to decide if you are tracking your expenses for a monthly, quarterly, or yearly period. An income statement should feature the following:  A header stating Income Statement  A header with the date, period covered, and the name of your company  Operating revenues  Operating expenses  Gross profit  Operating income  Non-operating revenues and expenses  Net income  Multi-step income statement example  Your multiple-step income statement should look like the below:  [Your Company Name]  Income Statement  For the year ending April 5, 2021  Sales $200,000 Costs of goods sold $175,000 Gross profit $25,000 Operating expenses Selling expenses $5,000 Commission $4,000 $9,000 Warehouse expenses $7,000 Supplies expense $2,000 $9,000 Total: $18,000 Non-operating expenses Interest revenues $4,000 Interest expense ($1,000) Total: $3,000 Net income $21,000 The free online Word editor lets you compose any document in your web browser without downloading and installing any program. As a small business, you probably dont need to use a multiple step income statement. They are mostly used by large businesses, and as a sole proprietor or small company, the additional admin may outweigh any potential benefits. If you are a publicly traded company, regardless of size, you will be required to create more detailed financial reports, which includes a multi-step income statement along with your cash flow statement and balance sheet. Its also worth noting that if you are looking to apply for a bank loan, you may be asked to present a multi-step income statement, as they give more insight into how profitable your operations are. This is also true if you are looking to attract investors, who will appreciate the extra steps you have taken to complete a multiple step income statement as opposed to single-step. We can help  GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.