discussion response

The key differences between a multiple$-$step and single$-$step income statement are the differentiations of operating and non$-$operating activities which multiple$-$step statements use and single$-$step income statements leave out. Non$-$operating activities include current period expenses and revenues in interest, dividends as well as gains in sales of property, plant and equipment. Operating activities refer to current period expenses such as salaries, utilities, freight$-$in$,$ advertising and insurance costs that the business needs in order to keep the business running.$$

Some reasons as to why most companies utilize multiple$-$step income statements as to single$-$step can be that most users that investigate company financial statements are interested in financial trading or investing in stocks meaning that they want to fully understand where the companies' expenses and revenues are coming from. As operating activities are sustainable they can be understood as having a pattern whereas non$-$operating activities typically happen sporadically and include other irrelevant information. A exterior stocktrader wants to know how a business will succeed in the markets thus is looking for patterns that only a multiple$-$step income statement will show to help their investments. This is probably the reason it is most popular.$$