Single Step Income Statement


We have already discussed in detail that income statement is the first report in financial statements preparation . its main purpose is to find out the accurate net income or net loss at the end of accounting period.

A single step income statement is a financial report where incomes and expenses are presented into one step and no classification of incomes and expenses are reported. All incomes earned whether earned from main sources or earned from other sources are combined and listed under one head/category. Similarly, all expenses are reported under one head / category and totaled together. The total of these expenses are subtracted from the total of incomes reported above of these expenses and net income or net loss is arrived at.

Format and Example

This example elaborates the single step income statement format as under.

A Traders
Income Statement
For the Year Ended December 2015
($) ($)
Profit Received on Investments
Total Revenue
Less: Operating Expenses
Salaries to staff
Supplies expense
Water & electricity charges
Communication charges
Travelling & Conveyance
Printing & stationery
Operating income
Net Income

We can see from above example that all revenues/incomes are listed into one main category called ‘revenue’ irrespective to the sources from which they are received. Likewise, expenses are reported into one main category called ‘expenses’ and no classification of these expenses according to their purposes etc. are made. 


Although a single step income statement calculates the accurate amount of net income or net loss, ye there are certain shortcomings in such presentation. These shortcomings can be briefly be explained as under:

Since there is no sub-categories or classification of incomes are made in this format, the evaluation of receipts or incomes from main sources (main operations) become a little cumbersome. For all decisions made for business operations, there is need to consider accurate volume of revenues earned from main sources. Investors, creditors and other stakeholders should know that how much the business has earned from its main sources. We know that his income statement format lacks with any such specific information because all the incomes received are clubbed or listed into one main category.

Many users of the financial statements desire to see the gross profit of the business. Gross profit is the difference between incomes earned from main sources less all direct attributable cost. Suppose in a whole sale business dealing in furniture of all sorts, gross profit will be Sales of furniture made during the year less cost of these sales. Figuratively we can show this as follows:

Sales (Furniture Sold)
Cost of Goods Sold
Gross Profit

However, the calculation of gross profit in a single step income statement is not possible at all because no such arrangements are made.

Moreover, the business concerns also more often want to look into the level of certain expenses falling under certain classes. These classes or heads can be administrative expenses, selling & distribution expenses, financial cost and other expenses. These expenses under their specific heads or sub-categories are evaluated, analyzed and thus are controlled according to the results availed. In a single step income statement such meaningful evaluation of expenses cannot be carried out owing to the format this financial report (income statement) possess.