The single-step income statement is the format used to prepare an income statement where revenues, expenses, and net income are presented into a single subtotal.
For example, the revenue section records all types of revenues no matter those revenues are from the operation or non-operation. For example, interest income, revaluation gain, or gain on sales of assets. All types of expenses are recorded under this section and subtotal into one line in the expenses section.
Those expenses include the cost of goods sold, operating expenses, and loss on revaluation. The difference between these two sections creates another net loss or profit section.
It is simple like this.
This formal is easy for users of financial statements as it provide the simple presentation of income and expenses that occurred in the entity.
The key element of the Single Step Income Statement
1) Operating revenues:
Operating revenues are the revenues that an entity generates from its normal business activities. For example, if the entity is used as construction services, the revenues from the contractions contracts with its customers are considered the operating revenues.
This is because this revenue is generated from its main operating activities.
However, the company might generate some interest income that it deposits in the banks. This kind of income is not considered as revenues or operating revenues. In a single-step income statement, the operating revenues are recorded in the revenues section, including other income.
2) Non operating income:
Other income, non-operating income, or other income might imply the same kind of income that the entity is generating from its main operation.
As mentioned above, that income might include interest income. Other items that generally have the other income include the entity’s income from sales of fixed assets or other one-off income-generating activities. In a single-step income statement, the other incomes are recorded in the revenues section with the main revenues that the entity is generating in the period.
3) Operating expenses:
Operating expenses and non-operating expenses are recorded in the expenses all together in the single-step income statement. The expenses usually recorded in this section include salary expenses, sales, advertising expenses, sales expenses, administrative expenses, and office supplies expenses.
4) Non operating expenses:
Non-operating expenses are the expenses that are non-related to the entity’s daily operation. For example, interest expenses and other expenses that spend by the entity like selling of fixed assets. These expenses are recorded in the expenses section with other operating expenses of a single-step income statement.
The single-step income statement is not popularly used by an entity to prepare and present its income statement. However, this format is allowed to use by both IFRS and US GAAP.
The excellent point about this format is that users are straightforward in understanding the entity’s income and expenses for the period being shown.
However, this format could miss leading users of income statements, especially for non-accounting experiences users, because this format treats all kinds of revenues into only one section.
For example, some revenues from the main operation are also included here.
In some periods, those non-operating revenues like sales of non-current assets could be larges. And it could lead users to misunderstand that entity performance becomes better in that period.
The users of income statements might also miss understanding about expenses being present as they are all treated in the same section, whether they are operational or nonoperational expenses.
You can download this Single Step Income Statement template in excel or pdf by clicking below:
The following is the example of a single-step income statement: You can download the excel file here.