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Frank Avitia , Managing Director , AIS Investment Services
The difference is the layout of the statement. The multiple-step profit and loss statement segregates the operating revenues and operating expenses from the non-operating revenues, non-operating expenses, gains, and losses. The multiple-step income statement also shows the gross profit.
There are three benefits to using a multiple-step income statement instead of a single-step income statement:1. The multiple-step income statement clearly states the gross profit amount. Many readers of financial statements monitor a company's gross margin (gross profit as a percentage of net sales). Readers may compare a company's gross margin to its past gross margins and to the gross margins of the industry.2. The multiple-step income statement presents the subtotal operating income, which indicates the profit earned from the company's primary activities of buying and selling merchandise.3. The bottom line of a multiple-step income statement reports the net amount for all the items on the income statement. If the net amount is positive, it is labeled as net income. If the net amount is negative, it is labeled as net loss.
