Partial Income Statement
A partial Income statement is generally prepared by the company when there are certain or uncertain changes that affect the company’s financial performance and is reported for only a part of the accounting period. Normally, we prepare an income statementPrepare An Income StatementThe income statement is one of the company's financial reports that summarizes all of the company's revenues and expenses over time in order to determine the company's profit or loss and measure its business activity over time based on user requirements.read more for a single month or for a year. However, a partial income statement can be prepared for specific dates like from October 2, 2018, to October 29, 2018.
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For eg:
Source: Partial Income Statement (wallstreetmojo.com)
Partial Income Statement Example.
Let’s understand this concept with the help of an example-
Discontinued operations are the operations of that segment of the company which has been disposed of or sold. As per the accounting regulations, discontinued operations should report separately from continuing operations. Here, we prepare a Partial Income statement of a discontinued operation.
Suppose ABC Company had two segments. One segment manufactured cellular phone equipment and other segment manufactured office car vehicle equipment. Under GAAP, each segment is considered separate components. The cellular phone equipment segment has not been a profitable business segment for the company.
On May 1, 2012, the company planned to dispose of the segment cellular phone. The Company sells the segment on January 31, 2013, at a price of $2,000,000.The book value of this segment was $200,000, and as on December 31, 2012, the fair value of this particular segment was $2,500,000. The segment incurred a before-tax operating loss from operation of $200,000 during the full accounting year, i.e., January 1, 2012, to December 31, 2012. The income tax for the company is 35%. ABC’s after-tax incomeAfter-tax IncomeAfter-Tax Income is the amount of income left after deducting all the direct taxes levied by the respective country’s Government, i.e., the amount left for an individual or company's personal disposal. read more from continuing operations is $500,000.
Here, Partial Income Statement will be-
| Particulars | Amount ($) | Amount ($) |
|---|---|---|
| Income from Continuing Operations | 5,00,000.00 | |
| Discontinued Operation: | ||
| -Income (Loss) from operations | -2,00,000.00 | |
| -Income Tax Benefits (Expense) | 70,000.00 | |
| Income (loss) from discontinued Operation | -1,30,000.00 | |
| Net Income | 3,70,000.00 |
As we can see, this income statement is only reporting information related to discontinued operations. Similarly, we can prepare partial income for the cost of goods sold, gross profitGross ProfitGross Profit shows the earnings of the business entity from its core business activity i.e. the profit of the company that is arrived after deducting all the direct expenses like raw material cost, labor cost, etc. from the direct income generated from the sale of its goods and services.read more, or other components of an income statement.
Single Step Partial Income Statement
Single step Partial Income statement prepares only for a particular component of Income statements like income statement for the cost of goods soldThe Cost Of Goods SoldThe Cost of Goods Sold (COGS) is the cumulative total of direct costs incurred for the goods or services sold, including direct expenses like raw material, direct labour cost and other direct costs. However, it excludes all the indirect expenses incurred by the company. read more, discontinued operation, or gross profit, etc. One can prepare this income statement for different components of an Income statement.
Format – Partial Income Statement Discontinued Operations
| Partial Income Statement Discontinued Operations | ||
| Particulars | Amount ($) | Amount ($) |
| Income from Continuing Operations | XXX | |
| Discontinued Operation: | ||
| Income (Loss) from operations | (XXX) | |
| Income Tax Benefits (Expense) | XXX | |
| Income (Loss) from discontinued Operation | XXX | |
| Net Income | XXX |
| Partial Income Statement Cost of Goods Sold | ||
| Particulars | Amount ($) | Amount ($) |
| Sales | XXX | |
| Cost of Goods Sold | ||
| Beginning Inventory | (XXX) | |
| Purchase Net | XXX | |
| Ending Inventory | (XXX) | |
| Cost of Goods Sold | XXX | |
| Gross Profit | XXX |
Multi-Step Partial Income Statement
A multi-step partial income statement prepares more than one component of Income Statement. It includes two or more than two steps of an income statement.
| Multi Step Partial Income Statement | ||
| Particulars | Amount ($) | Amount ($) |
| Sales | XXX | |
| Cost of Goods Sold | ||
| Beginning Inventory | (XXX) | |
| Purchase Net | XXX | |
| Ending Inventory | (XXX) | |
| Cost of Goods Sold | XXX | |
| Gross Profit (Step 1) | XXX | |
| Less: Operating Expenses | XXX | |
| Net Operating Income (Step 2) | XXX |
AuditorsAuditorsAn auditor is a professional appointed by an enterprise for an independent analysis of their accounting records and financial statements. An auditor issues a report about the accuracy and reliability of financial statements based on the country's local operating laws.read more do not certify a partial income statement because it does not include a complete income statement. It can only be used for a specific purpose. Management uses it when they want to analyze some information about a certain line item of an income statement. It only prepares for the internal use; auditors do not prefer this at the time of auditing of financial statements.
Conclusion
Here are some bullet points to understand partial income statement-
- The partial Income statement reports only some portion of the income statement.
- It reports the information only for the part of the accounting periodAccounting PeriodAccounting Period refers to the period in which all financial transactions are recorded and financial statements are prepared. This might be quarterly, semi-annually, or annually, depending on the period for which you want to create the financial statements to be presented to investors so that they can track and compare the company's overall performance.read more.
- Companies prepare it only in rare cases, like if one of the segments of the company is discontinued.
- It can be a single step and multi-step statement.
- It is not certified by auditors.
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