Why Do Companies Use Multiple-Step Income Statement?

Research Assignment There are many different companies throughout the world who all play a part in getting their product or service to the customer. There are manufacturers who distribute their goods to a store of some sort. The store is considered the merchandiser who will then distribute the products to the customer. If a company does not manufacture or merchandise a good, they could provide a service to the customer. No matter the type of company, the goal is still the same; they want to end the year making a profit. Therefore, they must keep a close eye on their financial statements throughout the year, and see if ended their year making a profit on their good or service. They do so by completing an income statement at the end of the year. The income statement is where they log their revenue and expenses throughout the year. A company is able to see their profit for the year by either using a single-step or multiple- step income statement. Both of which are acceptable and result in the same profit number or in terms of the income statement, the same net income. The first company is The Hershey Company. This company is a manufacturer who produces chocolate. When looking at their income statement for the past five years, it is evident that they use a multi-step income statement. Therefore, they get their net income …show more content…
What is important is that it is completed following the principles of GAAP. Furthermore, the information in the income statement must be correct, and accurately depict the company’s sales and transactions throughout the year. Likewise, depending on the type of company, whether it is a manufacturer or merchandiser providing a good, or a company who provides a service, there are multiple ways to recognize revenue. How a company recognizes revenue is up to the company itself and the companies it may have agreements