What is the typical format of the income statement for a sole trader?
Practice Questions
1 question
Q1
What is the typical format of the income statement for a sole trader?
Single-step format
Multi-step format
Both formats
None of the above
Sole traders can use either a single-step or multi-step format for their income statement.
Questions & Step-by-step Solutions
1 item
Q
Q: What is the typical format of the income statement for a sole trader?
Solution: Sole traders can use either a single-step or multi-step format for their income statement.
Steps: 5
Step 1: Understand that an income statement shows how much money a sole trader made and spent over a specific period.
Step 2: Know that there are two common formats for the income statement: single-step and multi-step.
Step 3: In the single-step format, all revenues are listed first, followed by all expenses, and the net income is calculated by subtracting total expenses from total revenues.
Step 4: In the multi-step format, revenues and expenses are categorized into different sections, such as operating and non-operating, to provide more detail before calculating net income.
Step 5: Choose the format that best suits the sole trader's needs and preferences.
