ACCT101-Handout07A

ACCT101-Handout07A - You can compare the difference between...

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For financial reporting purposes, we usually use multiple-step income statements instead of single-step ones. A multiple-step income statement takes the following form: Sales $ Less: Sales discount and/or Sales returns and allowance Net sales $ Less: Cost of goods sold Gross profit $ Operating expenses: Salaries expense Depreciation expense Rent expense Interest expense…. Etc. Total operating expenses Income from operations (or Operating income) $ Other revenues and expenses: Income before income tax Income tax expense Net Income $
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The following two income statements contain the same information. However, one is multiple-step and the other is single-step.
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Unformatted text preview: You can compare the difference between the two. (Source: Larson and Jensen, Fundamental Accounting Principles , 11 th Canadian Edition, McGraw-Hill Ryerson, Page 284) Note: You might find that in this example, interest expense is listed under other revenues or expenses. Usually, this is because 1) the interest expense is immaterial (the company rarely borrow any money), or 2) the interest expense is due to borrowings used in non-operating activities. If interest expense is generated from borrowings used in operations, it is more reasonable to include it in operating expenses....
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This note was uploaded on 12/07/2009 for the course ACCT ACCT 101 taught by Professor H during the Fall '08 term at HKUST.

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ACCT101-Handout07A - You can compare the difference between...

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