There is no single format for creating a multi-step income statement, but there are two basic formats that can be used for preparing one: the single-step format and the multiple-step format. Many small business owners wonder which format is best for their companies, but there are several differences between the two formats. Each style of a document will be different based on your company’s specific needs and budget.
A single-step format consists of three separate sections. First, you would have a section showing the income of the business from its inception to the end of the reporting period, usually three years. In the second section of your financial statement, you would be reporting on the income of the business through the end of the reporting period, usually seven years. Finally, in the third section of your financial statement, you would include an explanation of the results for each one of the three sections.
This format is similar to that of most financial statements, except that the first section reports the income of the business from its inception until the end of the reporting period. Therefore, the financial statement begins by reporting the balance at the end of the period, which is typically nine months. Next, you would report the earnings of the business, which includes both the income of the business and expenses for operations that are not covered by the income of the business, such as payroll expenses and depreciation expenses.
In the second section of your income statement, you would report on the revenue of the company. For example, if the first section of the financial statement reported the profits of the business, the second section would report the revenue of the business as well as other expenses, including advertising expenses and payroll costs, and include an explanation of these items. Finally, in the third section, you would include an explanation of the results of the analysis, which is usually done in the first section of the financial statement.
Another difference between the single-step and multi-step income statements is the information provided in the income statement. In the single-step format, the only item provided is the income of the business. While the numbers in the section report the income of the business, the multiple-step format shows a breakdown of the income of the business over the reporting period, giving you an overall picture of how successful the business is in relation to your budget. The multiple-step format allows you to see trends over the course of time and give you a more detailed look at the performance of the business.
In order to make the transition from the single-step format to the multiple-step format, you must first start by updating the financial statement to reflect your new format. You can do this by replacing any references to the income of the business in the document with references to its earnings. Once the financial statement has been updated, you must then prepare the statement as per the single-step format.
While the income statements of the single-step format are simpler and easier to prepare than the multi-step financial statements, it is still important to have a professional prepare your financial statements so that they will provide the most accurate information. It is important that the financial statement be prepared by someone with knowledge in the industry. For example, you should avoid hiring someone who is just starting out or who does not have experience with the type of business that you have.
There are a number of ways to prepare a single-step and multi-step financial statement. You may hire a professional to prepare it or use a software program that will prepare the statement for you. Either way, you will be able to get an accurate, comprehensive view of the performance of your business.