It is one of the most simple and easy to prepare income statement format. In this approach, we sum up all the revenues and gains and likewise sum up all the expenses. After that, we subtract the expenses total from the revenue and gains total to arrive at net income.
Net income/ net profit = (Revenues + Gains) – (All expenses + all types of losses)
This format is not regarded as the best format as there is no valuation of gross profit. Not just that, one cannot determine expenses segrgation according to the department or cost pool.
Sales Revenues $2,000,000
Total revenue $2,000,000
Expenses
Cost of goods sold 700,000
Promotional 60,000
Depreciation 40,000
Salaries 800,000
Rent 80,000
Entertainment 100,000
Total Expenses $1,780,000
Net Income $220,000
Example
ZTE is a large sized company engaged in telecommunication industry. It is regarded as top 3 companies in the industry due to its customer base. The main reason of such a large customer base is the quality of services and the value added services it offers to its customers at cheap rates as compared to the competitors. Following data is available for its recent financial year ended on 31st Dec 2016:
Sales revenue = $ 11,000
Purchases = $ 4,000
Opening stock = $ 3,000
Closing stock = $ 2,000
Depreciation expenses = $ 500
Rent expenses = $ 500
Insurance expenses = $ 300
Electricity expenses = $ 200
Parking expenses = $ 200
Repair & Maintenance expenses = $300
Sales return = $ 1,000
Required:
Prepare single-step income statement using the information given above.
Solution
Net sales = sales revenue – sales return = 11,000 – 1,000 = 10,000
Cost of goods sold = Opening stock + purchases – closing stock = 3,000 + 4,000 – 2,000 = 5,000
Expenses = depreciation expenses + rent expenses + insurance expenses + electricity expenses + parking expenses + repair & maintenance expenses = 500 + 500 + 300 + 200 + 200 + 300 = $ 2,000
ZTE
Single – Step Income Statement
For the Year Ended 31st December, 2016
| $ | |
| Sales revenue | 10,000 |
| Cost of sales | (5,000) |
| Expenses | (2,000) |
| Net profit | 3,000 |