ACC111 Lesson 5 Essay - Companies report profits earned on...

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Companies report profits earned on an income statement. While the income statements are universal to all companies, there are two common income statement formats; multi-step and single-step income statements. Each of the statements are customizable for different business operations. Companies report profits and expenses in one of these two formats. Investors and lenders look at a company’s income statement to determine a company’s overall health. First we will describe the multi-step income statement, revenues are presented in great detail, cost of goods sold is subtracted to show gross profit, operating expensesare separated from other expenses and operating income is separated from other income. The income statement reveals the company’s gross profit, which is the difference between its sales revenue and its cost of goods sold and operating profit, which is the difference between its gross profit and its

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