Accounting Partial Income Statement Income From Continuing Operations

A partial income statement is an income statement that is prepared for a non-standard period of time rather than the more typical monthly or annual periods for which income statements are typically prepared.

These statements are typically special purpose documents that are only prepared and used for a single occasion.

These documents may be prepared in response to significant events such as the acquisition of another company or the discontinuing of an operational segment.

However, they may simply be created in order to perform a detailed analysis of a specific period less than the organization's typical reporting period.

Understanding a Partial Income Statement

Partial income statements are special-purpose documents that are not prepared as part of a business's typical operations.

These statements are typically prepared in response to significant events such as the discontinuation of an operating segment partway through a company's accounting period, in which case these statements may be used to account for income resulting from the closed segment.

Because they are prepared for a non-standard period, these statements can account for any period, even as short as a single day.

Example of a Partial Income Statement

As an example, let's consider Abe's Frozen Foods, a frozen food manufacturing company with two subsidiaries.

These include a subsidiary manufacturing frozen French fries and another manufacturing frozen pizza.

Following Generally Accepted Accounting Principles (GAAP), each of these subsidiaries is regarded as a distinct business component.

Due to low demand, the manufacturer chose to shut down its frozen pizza subsidiary on September 1, 2020.

The company sold the subsidiary on February 28, 2021, for $3,000,000.

This subsidiary had a $300,000 book value.

Whereas the market value of the subsidiary was $3,300,000.

The subsidiary faced an operating loss of $300,000 prior to taxes from its operations from January 1, 2020, through December 31, 2020.

The business has an income tax rate of 35%.

Abe's Frozen Foods had an after-tax income of $700,000 from its continuing operations.

Income From Continuing Operations		$700,000.00
Discontinued Operations:
Loss on Operations	-$300,000.00
Tax Benefit	$105,000.00
Income Contingent Upon Discontinued Operations		-$195,000.00
Net Income		$505,000.00

The income statement above reports only the details of the discontinued subsidiary's operations.

However, an income statement could be prepared to show gross profit, cost of goods sold, and other parts of a business's income statement.

Different Types of Partial Income Statements

There are two main types of partial income statements which a company may choose to use.

To gain a closer understanding of them take a closer look at each in depth.

Single-Step

A single-step variety of partial income statement is prepared for a specific part of an income statement, such as for a discontinued operation, gross profit, or cost of goods sold.

A partial income statement can be prepared for different parts of the income statement.

For example:

Partial Income Statement Discontinued Operations
Income from Continuing Operations		$X
Discontinued operation
Loss on Operations	($X)
Tax Benefit	$X
Income Contingent Upon discontinued operations		$X
Net Income		$X

Partial Income Statement CoGS
Sales		$X
CoGS
Beginning Inventory	($X)
Purchase Net	$X
Ending Inventory	($X)
CoGS		$X
Gross Profit		$X

Multi-Step

This type of income statement shows multiple components of a full income statement.

It consists of several steps of the income statement.

Multi-Step Partial Income Statement
Revenue		$X
CoGS
Starting Inventory	($X)
Net Purchase	$X
Ending Inventory	($X)
CoGS		$X
Gross Profit		$X
Less Operating Expenses		$X
Net Operating Income		$X

Auditors

Auditors will not certify this type of statement.

It is only produced for a particular purpose since it is not a complete income statement.

A partial income statement is useful for management if they wish to examine the details about a specific item on the income statement.

This statement is prepared for the business's internal use, which is not what auditors are interested in when it comes time to audit the business's financial statements.

Key Takeaways

• A partial income statement only presents a portion of the information that is included on the full income statement.
• A partial income statement only represents information for less than a standard accounting period.
• A business will generally only prepare a partial income statement in response to a particular event, such as an acquisition.
• Partial income statements are not certified by external auditors, unlike a company's full income statement.

Article Sources & Citations

FundsNet requires Contributors, Writers and Authors to use Primary Sources to source and cite their work. These Sources include White Papers, Government Information & Data, Original Reporting and Interviews from Industry Experts. Reputable Publishers are also sourced and cited where appropriate. Learn more about the standards we follow in producing Accurate, Unbiased and Researched Content in our editorial policy.

1. Harvard Business School Online "HOW TO READ & UNDERSTAND AN INCOME STATEMENT" Page 1 . March 21, 2022

2. Harper College "MULTI-STEP INCOME STATEMENT" Page 1 - 16. March 21, 2022

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