A single-step income statement is a way of presenting the income statement in which all revenues and gains are listed and totaled in one section, all expenses and losses are listed and totaled in another, and net income is found with one subtraction. It does not show intermediate subtotals such as gross profit or operating income.
The format is the simpler of the two traditional layouts. The other, the multiple-step income statement, separates operating from nonoperating items and calculates several levels of profit. Single-step statements are common among small businesses, service firms, sole proprietors and nonprofit-style organizations, where there is little inventory and the extra detail adds little value.
Format
The structure is:
Here includes sales or service revenue, interest revenues, dividends received and gains on asset sales, and includes cost of goods sold, operating expenses, interest expense, losses and, in most presentations, income tax expense. Some companies show income tax separately as a final deduction, giving income before tax as one subtotal, but the statement is still regarded as single-step.
Worked example
A small engineering consultancy prepares the following single-step statement for the year:
| Item | Amount |
|---|---|
| Service revenue | $1,250,000 |
| Interest revenue | $8,000 |
| Gain on sale of equipment | $12,000 |
| Total revenues and gains | $1,270,000 |
| Salaries expense | $720,000 |
| Rent expense | $96,000 |
| Depreciation expense | $40,000 |
| Other operating expenses | $124,000 |
| Interest expense | $15,000 |
| Income tax expense | $60,000 |
| Total expenses | $1,055,000 |
| Net income | $215,000 |
A multiple-step version of the same figures would first show operating revenue of $1,250,000 less operating expenses of $980,000, giving operating income of $270,000, then add nonoperating income of $20,000 and subtract interest of $15,000 to give income before tax of $275,000, and finally deduct tax. Net income is the same $215,000 either way; only the presentation differs.
Advantages and disadvantages
- Simplicity: the statement is quick to prepare and easy for non-specialists to read.
- Neutrality: it avoids implying that some revenues or expenses are more important than others, which some preparers see as more objective.
- Less analytical information: it does not show gross profit or operating income, so users must calculate margins themselves, and they cannot easily separate the results of core operations from one-off gains and financing costs.
- Less useful for merchandisers: for retailers and manufacturers, gross margin is a key measure, which is why most of them use the multiple-step format.
Rules and current practice
US GAAP does not require a particular format for the income statement, so companies may choose single-step or multiple-step presentation, though certain items must be shown separately whichever is used, such as discontinued operations and, for public companies, earnings per share. The SEC's Regulation S-X sets out captions for public company statements. Many large US companies use a hybrid: a single list of costs and expenses, but with operating income shown as a subtotal. Under IFRS, IAS 1 has allowed considerable flexibility, but IFRS 18, effective from 2027, will require all companies to present defined subtotals, including operating profit, which effectively ends pure single-step presentation for IFRS reporters. The statement also forms the starting point for comprehensive income, which adds items such as unrealized gains recorded outside net income.