d. Income from Continuing Operations

• The section “income from continuing operations” includes all revenues, expenses, gains, and losses that are not required to be reported in other sections of an income statement.

• There are two formats for the presentation of income from continuing operations:1) The single-step format

2) The multiple-step format

d. Income from Continuing Operations

• In the single-step format, items are classified into two groups:1) Revenues

2) Expenses

d. Income from Continuing Operations, cont’d

• Revenues:o Sales (net of discounts and returns and allowances) $xxxo Gain on sale of equipment xxxo Interest income xxxo Dividend income

xxx $xxx

• Expenses:o Cost of goods sold $xxxo Selling expenses

xxxo General and administrative expenses xxxo Interest expense

xxxo Income from continuing operations xxx

$xxx• Income from continuing operations = $xxx + $xxx

Example of Single-Step Format:

• In a multiple-step format, operating revenues and expenses are separated from nonoperating revenues and expenses to provide more information concerning the firm’s primary activities.

d. Income from Continuing Operations, cont’d

• Examples of common intermediate income components:

1) Gross profit (margin)

2) Operating income

3) Income before income taxes

(Example of a multiple-step format on next slide.)