Traditional format income statements are prepared primarily for external reporting purposes.

Question

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Traditional format income statements are usually prepared for external reporting purposes, such as to present a company's financial performance and results to investors, creditors, and regulatory authorities. This format includes line items for revenue, cost of goods sold, gross profit, operating expenses, interest expense, taxes, and net income. Internal statements may have a different format and provide more detailed information for management decision-making purposes.

Traditional Format Income Statements Are Prepared Primarily for External Reporting