Traditional format and contribution income statement: Income statement is prepared by the organization to derive the net profit, contribution income statement was prepared for cost classifications but both formats indicate same net profit, even though some difference in the cost classifications has existed in both income statements formats. To determine: The difference between the Traditional format and contribution income statement Solution: Traditional income statement was prepared for showing company financial status at the same time contribution income statement was prepared for management decision making. Explanations: Traditional format income statement used simple heading, there are no cost classifications to record the expense, in further it is presented for external people interest such as stakeholders, new investors, creditors, government, etc., to declare a current business financial position. A contribution format income statement has cost classification; it has multiple costs heading such as variable cost and fixed cost. This format is prepared for internal people interest such as operation managers, senior managers, cost managers and other related executives to make the proper plan to control the cost either variable or fixed or both and to identify which cost is directly related to product manufacturing process. So this format is considered as an effective decision-making tool in cost control division. Conclusion: Both income statements formats would give same net profit but both formats would prepare for various purpose.

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