Question

Locate an income statement that deviates from the traditional multi-step format and explain why it would be useful for the specific business or industry.

Answer 1

An example of Gary’s Garden Furniture income statement (2018) is a single-step income statement that deviates from the traditional multi step format due to the lack of various sources of revenues and expenses. The income statement of Gary’s Garden Furniture store has only straightforward information that conveys the company revenue, expenses, and bottom-line net income. Compared to a traditional multi step format contains categorized/itemized list of revenues, indirect costs (i.e. research and development, legal fees. Etc.), expenses broken down by department, gross profit, operating profit – specific and extensive information on the company’s operations. The nature of a multi/single step format on income statement depends on the complexity and size of the business (i.e. multi-level department company vs. smaller business).

As for Gary’s Garden Furniture store, it might be useful with a simplified single-step approach since there are less variables to make record tracking easier for accountants to prepare statements. In addition, it makes the statements easier to read – access the company’s health. Due to the lack of complexity in the business of garden furniture, the focus on net income figures, instead of gross margins and operating margin data may not be of utmost importance, if not actively seeking investor to invest in the company.