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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

LO1 A multiple-step form of income statement calculates gross profit, before subtracting operating expenses.

To determine

Identify whether the given statement is true or false.

Answer

The given statement “A multiple-step form of income statement calculates gross profit, before Subtracting operating expenses” is true.

Explanation

Multi-step income statement:

Multi-step income statement provides step-by-step computation of net sales, cost of goods sold, operating expenses, gross profit, other revenues and expenses, income from operations and net income.

  • In a multi-step income statement, Initially Gross sales are computed (less sales returns and allowances and sales discounts) and this difference is known as net sales.
  • Cost of goods sold is subtracted from net sales to get gross profit or gross margin. Then, operating expenses are subtracted from the gross profit to calculate income from operations.

Therefore, from the above explanation, the given statement “A multiple-step form of income statement calculates gross profit, before Subtracting operating expenses” is true.

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