 Hello in this lecture we will define single step income statement. According to fundamental accounting principles wild 22nd edition the definition of single step income statement is income statement format that subtracts total expenses including cost of goods sold from total revenues with no other subtotals. When we think about a single step income statement we can contrast that from a multi-step income statement. Single step income statement often being used by service companies that do not have inventory and therefore don't have cost of good sold multi-step income statement often being used by companies that have inventory whether they be merchandising or manufacturing who do have cost of goods sold and may have more use for more subtotals of expenses. So if we look at a single step income statement it might look something like this we just have one format of revenue we pull that over to the right hand side and then we have all the grouping of expenses in one grouping if we had inventory we would then have cost of goods sold and that cost of goods sold will just be grouped in with all the other expenses rather than breaking out subcategories such as gross profit or gross margin we then have the simple calculation of net income as revenue minus expenses contrasting this to a multi-step income statement which looks much more complex but all we're doing is really breaking out more categories meaning the revenue might be broken out towards revenues and then have the allowance and discounts in there to get net sales we would then want to compare sales to cost of good sold to get the gross profit that compares in often being very useful for a company that has inventory then we might break out the other operating expenses between selling and general administrative finally getting down to the net income down here again these are second these are different income statements not the same numbers but the format would be similar from a single step to a multiple step income statement again multiple step might be used for someone a company that has inventory but we may want to use a single step income statement in those situations as well if we just want the simplification if we just want someone that just wants to see revenue less expenses see that bottom line number of net income then a single step income statement is the way to go