 Hello, in this lecture we will define multi-step income statement. According to fundamental accounting principles, while 22nd edition, the definition of multi-step income statement is income statement format that shows subtotals between sales and net income, categorizes expenses and often reports the details of net sales and expenses. So the multi-step income statement is a format of an income statement, income statement representing revenue and expenses, bottom lines being net income. The multi-step income statement will have those components as well but we can contrast the multi-step income statement to a single-step income statement, a more simplified income statement where we're basically just going to have one group of revenue, one group of all the expenses in one group and then calculate net income. Multi-step means we're going to have more subcategories along the way to eventually get to net income. For example, single-step income statement may just have the one group of income. We have a list of all the expenses, we group those expenses out and we basically just have the revenue less the expenses, giving us that net income bottom line number on the income statement. A multi-step income statement is still going to get to that bottom line net income number. This isn't the same income statement but we're getting to that bottom line net income number but now we've got some more steps meaning we've got the revenue less the contra revenue accounts which are going to be the sales returns and allowance oftentimes, giving us net sales. Well, they're going to take that net sales, we can subtract out cost of goods sold, giving us more detail, giving us another subtotal on our way down to that net income total of gross profit. Then we can categorize the expenses, we could categorize them as selling expenses and general administrative expenses rather than just listing all the other operating expenses and then we can finally get down here and get back to the net income number. So in essence, the same calculation as there is going to talk about revenue minus expenses but we're breaking out the categories of revenue and expenses in this format often used for manufacturing or a company that has inventory a merchandising type company.