Income Statement Presentation Methods Analysis

Running head: INCOME STATEMENT PRESENTATION METHODS ANALYSIS
INCOME STATEMENT PRESENTATION METHODS ANALYSIS
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INCOME STATEMENT PRESENTATION METHODS ANALYSIS1
Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
Income Statement.......................................................................................................................2
Absorption Cost Method............................................................................................................2
Advantages.............................................................................................................................3
Disadvantages........................................................................................................................3
Direct/Variable Costing Method................................................................................................4
Advantages.............................................................................................................................5
Disadvantages........................................................................................................................6
Recommendation....................................................................................................................6
Conclusion..................................................................................................................................7
References..................................................................................................................................8

INCOME STATEMENT PRESENTATION METHODS ANALYSIS2
Introduction
This report titled “Income statement presentation method analysis” is prepare to
compare the two different method of presenting the income statement to identify the better
method of presenting the income statement of the company. The main two method
“Absorption Costing Method” and “Variable or Direct Costing Method” are consider for this
report. Further, this report explains both the methods and their advantages and disadvantages
related to the firm. Lastly, paper concludes, in the basis of the analysis and recommends the
best among the above-stated two method of presenting the income statement.
Discussion
Income Statement
The income statement is statement that shows all the incomes and expenditures of a
particular period. This is one of the important statement of three financial statement to report
the financial performance of the company along with the Balance sheet and Cash flow
Statement (Robinson, et al., 2015). This report is also known as “Statement of revenue and
expenditure” and “Profit and loss statement”. This statement provide the all information of
the revenues earned and expenditure incurred by the company during a particular financial
period. This statement is important to analyse the financial performance of the company for a
given period in investor’s point of view.
Absorption Cost Method
This method is used to prepare the tradition income statement. The method of income
statement consider the costs after dividing them into period cost and product cost. To
understand this method in a better way is required to understand the concept of both product
and period cost (Būmane, 2018). Therefore, to prepare the income statement under the
absorption cost method, first step is to calculate per unit cost of direct labour, direct material,