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Financial Accounting by Robert Nothhelfer

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3.2Income statement

For all companies, the Commercial Code does not prescribe any rules for the income statement except that it must include all income and expenses from the period (§ 242 sect. 2 and § 246 sect. 1). In particular, no minimum structure is required, but the GAAP must be applied.

For corporations there are more detailed rules:

–The income statement must be prepared in vertical format, i.e. all items are in lines: income is added, expenses are deducted; an account format is unacceptable (§ 275 sect. 1).200

–The income statement can be prepared according to either a total-cost format or cost-of-sales format (see below); the formats may not be mixed.

The two formats look as follows:201

Tab. 3.21: Formats for income statement.

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