Question

Do single step and multiple step income statements both reflect the full disclosure principle.

Answer 1

Yes, both the types of statements reflect the full disclosure principle as they list out all the revenues and expenses. The difference is that, while

*the multiple step income statement is analytic in reporting the profit at different stages as gross profit, operating profit, profit before taxes and profit after taxes, with classification of expenses, accordingly, as cost of goods sold, operating expenses [with separate classification of selling expenses and administrative expenses], other expenes/income and taxes.

*the single step income statement is not analytic and reports all revenues and expenses with no classification, and reports only the profit after taxes.

A sample of each of the methods of presentation of income statements are given below:

MULTI-STEP INCOME STATEMENT
Sales			$                    -
Less: Sales discounts		$                     -
Less: Sales returns and allowances		$                     -	$                    -
Net sales			$                    -
Cost of goods sold			$                    -
Gross profit			$                    -
Expense:
Selling expenses:
Advertising expense	$                      -
Depreciation expense-Store equipment	$                      -
Rent expense-Selling space	$                      -
Sales salaries expense	$                      -
Stores supplies expense	$                      -
Total selling expenses		$                     -
General and administrative expenses:
Insurance expense	$                      -
Office salaries expense	$                      -
Rent expense-Office space	$                      -
Total general and administrative expenses		$                     -
Total expenses			$                    -
Net income			$                    -
SINGLE-STEP INCOME STATEMENT
Sales		$                     -
Less: Sales discounts	$                      -
Less: Sales returns and allowances	$                      -	$                     -
Net sales		$                     -
Expense:
Cost of goods sold	$                      -
Advertising expense	$                      -
Depreciation expense-Store equipment	$                      -
Rent expense-Selling space	$                      -
Sales salaries expense	$                      -
Stores supplies expense	$                      -
Insurance expense	$                      -
Office salaries expense	$                      -
Rent expense-Office space	$                      -
Total expenses		$                     -
Net income		$                     -