Prepare The Statement Of Comprehensive Income Using Multi Step Approach

A standard ci statement is usually attached to the bottom of the income statement and includes a separate heading.

Prepare the statement of comprehensive income using multi step approach. Statement of comprehensive income. Multi step income statement entities around the world even if they are using different accounting frameworks they use this method to prepare income statement. An alternative to the single step income statement is the multiple step income statement because it uses multiple subtractions in computing the net income shown on the bottom line. Small businesses have two reporting options when preparing an income statement.

But don t depend solely on it. A statement of comprehensive income contains two main things. A single step income statement uses a single equation to compute the net income of the business and it is a more simplified report compared to a multi step income statement. Compute gross profit total sales cost of goods sold step 2.

The net income net income net income is a key line item not only in the income statement but in all three core financial statements. Compute net income income from. While it is arrived at through the income statement the net profit is also used in both the balance sheet and the cash flow statement. A statement of comprehensive income is the overall income statement that consolidates standard income statement which gives details about the repetitive operations of the company and other comprehensive income which gives details about the non operational transactions such as the sale of assets patents etc.

As stated earlier in multi step format there are multiple subtotals in the income statement. Whenever ci is listed on the balance sheet the statement of comprehensive income must be included in the general purpose financial statements to give external users details about how ci is computed. Sales php80 000 00 merchandise inventory beg php5 000 00 sales discount 5 000 00 net purchases 10 500 00 sales returns 2 000 00 freight in 8 000 00 merchandise inventory end 3 500 00 general expenses selling expenses 12 000 00 4 000 00. Prepare the statement of comprehensive income using a multi step approach.

The format you choose depends on the type of business you own and the ultimate purpose of the income statement you re creating. This format coupled with functional basis of classification of expenses is the best available format from understandability point. You can create a single step income statement or a multi step income statement. Let s take a look at a multi step income statement example.

As you can see this multi step income statement template computes net income in three steps. Compute income from operations gross profit operating expenses step 3.