COURSE

BUS 1102 – Basic Accounting

Think It Through: Which Income Statement Format Do I Choose? You are an accountant for a small retail store and are tasked with determining the best presentation for your income statement. You may choose to present it in a multi-step format or a simple income statement format. The information on the statement will be used by investors, lenders, and management to make financial decisions related to your company. It is important to the store owners that you give enough information to assist management with decision-making, but not too much information to possibly deter investors or lenders. As you begin to create your presentation, consider the following:

• What is the purpose of an income statement for a retail business?
• Which statement format do you choose?
• Why did you choose this format?

SOLUTION  

What is the purpose of an income statement for a retail business?

A retail business’ income statement informs the business owner and the accountant of the company’s financial standing. Retailers may get valuable insight into their operations by comparing and contrasting the results of many income statements for the same time period. To accurately account for earnings, a retail establishment must have a business strategy considering all operating costs. This will aid the retail establishment in setting appropriate markups for raw materials and selling prices. Payroll, rent, repairs, and utilities are all essential costs of running a retail establishment. As a result, the income statement facilitates the company strategy analysis. When a retail company loses money, an income statement may be used as a bargaining chip between employees and the owner to find ways to boost profits while cutting costs (Franklin et al., 2020). …..please click the icon below to purchase the solution at $10