The normal income statement which constitutes one of the financial statements of company, is financial income statement. So functional income statement is an income statement that segregates all costs by use; it shows revenues less cost of goods sold ( gross margin) less selling and administrative expenses. This approach is useful for financial reporting purpose; it provides outside readers with information about company’s progress and about which functional areas are being emphasized. For management’s use in the decision-making process, however, an income statement that follows a cost behavior approach, often referred to as a Contribution Margin Income Statement, is more valuable.
When the management of a business makes some decisions, it often refers to the normal income statement because the normal income statement is more useful.（）The normal income statement which constitutes one of the financial statements of company, is financial income statement. So functional income statement is an income statement that segregates all costs by use; it shows revenues less cost of goods sold ( gross margin) less selling and administrative expenses. This approach is useful for financial reporting purpose; it provides outside readers with information about company’s progress and about which functional areas are being emphasized. For management’s use in the decision-making process, however, an income statement that follows a cost behavior approach, often referred to as a Contribution Margin Income Statement, is more valuable.
Form the functional income statement we can see clearly the total revenue, total cost and gross profit etc.（）| The normal income statement which constitutes one of the financial statements of company, is financial income statement. So functional income statement is an income statement that segregates all costs by use; it shows revenues less cost of goods sold ( gross margin) less selling and administrative expenses. This approach is useful for financial reporting purpose; it provides outside readers with information about company’s progress and about which functional areas are being emphasized. For management’s use in the decision-making process, however, an income statement that follows a cost behavior approach, often referred to as a Contribution Margin Income Statement, is more valuable. |
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