Multi Step Income Statement Example Template Explanation

multi step income statement example

In a true single-step income statement with no subtotals, line items for net revenues and costs and expenses are listed with a single total for Net income (loss). Businesses may include a subtotal for Total expenses in a single-step income statement. Management accountants and financial analysts use other types of multi-step income statements, showing separate sections for fixed and variable costs or direct and indirect costs. This section is where you include all your operating expenses such as advertising, salaries, rent, utilities, insurance, legal fees, accounting fees, supplies, research and development multi step income statement costs, maintenance, etc. Don’t include interest expense and income taxes (they will be included later). The income statement calculates the net income of a company by subtracting total expenses from total income.

While both aim to report a business’s net income, they differ significantly in their structure and the depth of insight they provide.
It shows all revenues and expenses of the company over a specific period of time.
Throughout this article, readers will encounter not only a thorough examination of each segment but will also be guided through illustrative examples that bring the Multi-Step Income Statement to life.
For example, our retailer isn’t in the business of receiving insurance proceeds.
These take minimal time to prepare and don’t differentiate operating versus non-operating costs.
Whether you’re assessing the profitability of a new product line, evaluating operating costs, or planning for future investments, detailed financial statements are your most reliable compass.

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multi step income statement example

Income statements, also called profit and loss statements, are one of the major financial statements prepared by businesses. A multi-step income statement is a financial report that details a company’s revenues and expenses in multiple steps to arrive at net income. It separates operating revenues and expenses retained earnings balance sheet from non-operating ones, providing a clearer view of core business profitability.

Multi-step income statement involves more than one subtraction to arrive at net income and it provides more information than a single-step income statement.
It is very significant to view the comparative financial statements over time so that one can see and judge the trends and then possibly catch the misleading placement of the expenditures.
An income statement (also known as a profit and loss account) is one of the financial statement that shows the income and expenses of a company for a specified time.
Together, the income statement and balance sheet provide a comprehensive view of a company’s financial health, each from a different perspective but both are essential for a complete financial analysis.
Operating activities in a multi-step income statement are related to the core business operations, such as sales revenue and operating expenses (e.g., payroll, rent).
The difference between gross profit and operating expenses give operating income.

Example of a Multiple-Step Income Statement

multi step income statement example

Operating income is calculated by subtracting total operating expenses (both selling and administrative) from the gross profit. It represents the profit a company earns from its primary business operations. Multi-step income statement templates structure these financial data points for easy analysis. For example, template sections may include gross profit, operating income, income from continuing operations, and net income.

What is the difference between operating and non-operating activities in a multi-step income statement?

multi step income statement example

For a real-world example, let’s look at Microsoft Corporation’s June 2025 Income Statement as reported to the Securities and Exchange Commission (SEC). If you subtract all the outgoings from the money the company received, you are left with $21,350. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. Join Community Hub, a trusted space where Sage users connect, collaborate, and grow.

multi step income statement example

Step 6: Non-Operating Income and Expenses

multi step income statement example

A single-step statement uses one calculation for net income, while a multi-step statement calculates gross profit and operating income separately. Finally, Net Income (Income Before Tax – Income Tax Expense) is the absolute profit your business has generated after all expenses, including taxes, have been accounted for. This is the figure that ultimately adds to your business’s equity (or retained earnings) and represents the final success of your financial period. Having meticulously calculated your net income after accounting for income tax expenses, you now hold the final piece of your financial puzzle. This means that after covering the direct costs of goods sold and all the day-to-day expenses required to run the business, our Small Business generated $20,000 in profit from its core operations.

Operating Head: Selling and Admin Expenses

Small companies with simple operations, sole proprietors, and partnerships. The previous section provided a comprehensive guide to constructing your Multi-Step Income Statement, offering a practical blueprint for its creation. To truly harness this strategic advantage, it’s crucial to understand the building blocks of this powerful financial tool. As a small business owner, comprehending your financial landscape is not merely good practice—it’s imperative for sustained growth and informed decision-making. The last caption on Bookkeeping for Startups the Income Statement is Income taxes amounting to 641$.

In the bottom section of your income statement, below your operating activities, create a section for your non-operating activities.
Select a multi-step or a single-step income statement based on your business size and needs.
Typically, publicly-traded companies prepare and publish a Multi-Step Income Statement quarterly and annually.
The detailed breakdown better highlights relationships between accounts to assess operational efficiency.
This deeper dive reveals your Operating Income, a key indicator of your business’s true operational efficiency.

The users will know the profit earned from the primary activities of buying and selling goods and how it differs from the non-operating activities. A multi step income statement is more detailed than a simple single step income statement. It provides insights that financial statement users need when reading a profit and loss statement prepared using GAAP accounting standards.