Definition: A single step income statement is a financial statement format that lists all expenses including cost of good sold in one column. In other words, the single step income statement presentation doesn’t break expenses out into categories like cost of goods sold, operating, non-operating, and other. All of the expenses are listed together and totaled.
What Does Single-Step Income Statement Mean?
Many companies like this format because it is simple and easy to prepare. Expenses are not typically listed out in detail. Instead, individual expense accounts are combined into broad categories like selling expenses, general and administrative expenses, and cost of goods sold. A single step statement rarely lists more than a few main expense categories.
Here is an example of a single step statement that does list out more detailed expense accounts:
As you can see, all of the expenses are added up and totaled into one number. This is great for simplicity’s sake, but it doesn’t give the external users of the financial statements much information about the company operations. Typically, public companies are required to issue a multi-step statement to the public. Private companies are often required by banks and other creditors to either issue a multi-step statement or develop a detailed schedule listing specific expenses in order to get financing.
Although the single step income statement lacks detail, it is relatively easy to prepare and easy to analyze. That is why it’s most often used for internal purposes. Management prepares single step statements for single departments as well as company divisions to analyze the performance during a period and set budget goals for the next period.
Some managers use a combination single-multi step statement for internal uses. These combination statements typically include slightly more detail than the single step but less detail than a true multi step statement.