Question

Explain each of these.

Multi-Step Income Statement vs. Simple Income Statement, Journal Entries Perpetual Inventory System Sale, Periodic Inventory System Sale, Financial Statements, How to calculate Net Sales, Gross Profit, Gross Profit Rate, COGS, Net Income,

Answer 1

Multi step income statement :-

This statement segregates the operating revenues and operating expenses from non - operating revenues and non - operating expenses, gains and losses. It shows the gross profit (net sales minus cost of goods sold )

Simple income statement :-

This statements shows all the income and expenses for a certain period without any segregations. This will show the profitability of the company.

Multiple step income statement vs simple income statements

1. This segregates all the Income 1. It does not show any

and expenses into operating segregations between

and non operating. Operating and non operating

2. This gives gross profit. 2. This gives net profit.

3. It is tailor made format. 3. It is ready made format.

Calculations of above terms

Net sales = deduct all the sales returns incurred for sales from gross sales

Example

Net sales = gross sales - sales returns

Gross profit = net sales less all direct cost incurred for sales of products or services

Gross profit = sales - ( open inventory + purchases - closing inventory)

Gross profit rate = gross profit ÷ sales × 100

Cost of goods sold = all cost incurred for the sale of goods

Net income = all income minus all expenses.

These are all the information required to solve the above question.

I hope, all the above given points are helpful to you.

Thank you.