Melissa D. Allison
Assignment 1: Exxon versus Chevron
ACC 303: Intermediate Accounting
Professor Elizabeth Hewitt
March 3, 2015
EXXON VERSUS CHEVRON 2
Exxon versus Chevron
There are multiple financial statements that are normally prepared by a publicly traded
company. The four most commonly used statements are the balance sheet, income statement,
cash flow statement, and statement of retained earnings. Financial statements show you where a
company’s money comes from, where it has went, and where it is now (“Beginner’s Guide To”,
n.d., para. 3). According to page 160 (Kieso, Weygandt, & Warfield, 2014), “The income
statement is the report that measures the success of a company operations for a given period of
time.” Therefore, the income statement will be the main focus in reviewing Exxon versus
Chevron.
To begin, there are two commonly used types of income statements. The first is the single-
step income statement. A single-step income statement offers a very straightforward approach to
a company’s financial activity. Revenues and gains are subtotaled together at the top of the
statement, while expenses and losses are subtotaled together below the revenues and gains. Then,
the subtotal of expenses and losses are subtracted from the subtotal of revenues and gains
(Single-Step, n.d.). There are two main benefits of the single-step income statement. It is very
easy to compile, and it is also very easy for the most basic users to understand. On the other
hand, the single-step income statement does not provide a lot of information. It does not
calculate the gross profit of the company, either, leaving investors without any real concept of
profitability (Single-Step, n.d.).
Secondly, there is a multiple-step income statement. This type of income statement provides
in-depth information regarding the gross profit and operating profit of a company. It also
provides the subtotals that lead to the net-income calculation. The operating section of the
multiple-step income statement will provide information and revenues and expenses, while the
EXXON VERSUS CHEVRON 3
non-operating section will contain information about the gains and losses of indirect activity
(Investopedia, n.d.). The specific sources of revenues and expenses are detailed, giving more
information to investors, so they can further understand the financial health of the company. The
downside to the multiple-step income statement is the amount of preparation time that goes into
creating it, as well as the possible confusion it may cause users who want more than the basic
information (Kokemuller, n.d.).
Furthermore, after reviewing the income statements for Exxon and Chevron, it is clear they
both use the multiple-step income format. Exxon and Chevron are both large, publicly traded
companies, therefore, investors and creditors need to have as much information as possible
regarding both companies. In addition, it is clear Exxon is more profitable than Chevron. With
that being said, both companies seen a drop in their gross profits, operating profits, and net
