Question 19

Question

You run into Greg Norman at a party and begin discussing financial statements. Greg says, “I prefer the single step income statement because the multiple-step format generally overstates income.” How should you respond to Greg?

Step-by-Step Solution

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Answer

Both the formats of income statement multi-step and single-step report the same net income.

1Financial Statements

Financial statements are the annual reports of a business concern containing the summarized information of one year’s financial information.

2Explanation to Greg

According to the given scenario, the concerned person should be provided with the proper explanation of the two different formats of the income statement.

The amount of net income remains the same in both cases; the only difference is that a multi-step income statement reports the revenues and expenses in a bifurcated form, such as operational and non-operational.

On the other hand, the single-step income statement presents the revenues and expenses in an aggregated way.

Question 18Q

Question 20Q

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