AC 211 Lecture 14: Merchandising Operations and the Multistep Income Statement (Part 3)
Document Summary
To show how much profit is earned from product sales, without being clouded by other operating costs, merchandise companies often present their income statement using a multistep format. Multistep income statement: reports alternative measures of income by calculating subtotals for core and peripheral business activities. Multistep format separates the revenues and expenses that relate to core operations from all the other (peripheral) items that affect net income. For merchandisers, a key measure is the amount of profit earned over the cost of goods sold, so their multistep income statements separate cost of goods sold from other expenses. Gross profit (gross margin, margin): net sales less cost of goods sold. Gross profit percentage: indicates how much above cost a company sells its products; calculated as gross profit divided by net sales, the percentage of profit earned on each dollar of sales, after considering the cost of products sold.
