Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Single-step Income Statement

Financial Accounting

4. Merchandising Operations

Single-step Income Statement

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Multiple Choice

Selling and administrative costs first appear on the:

Balance sheet under current liabilities

Single-step income statement under operating expenses

Statement of cash flows under investing activities

Retained earnings statement as a deduction from net income

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Understand the nature of selling and administrative costs: These are expenses incurred during the normal operations of a business, such as salaries, office supplies, and advertising. They are not directly tied to the production of goods or services.

Identify the financial statement where selling and administrative costs are reported: Selling and administrative costs are part of operating expenses, which are reported on the income statement. Specifically, they appear under the 'Operating Expenses' section in a single-step income statement.

Clarify why selling and administrative costs do not appear on other financial statements: These costs are not liabilities, so they do not appear on the balance sheet. They are not cash flows related to investing or financing activities, so they do not appear on the statement of cash flows. They are also not deductions from net income on the retained earnings statement.

Review the structure of a single-step income statement: In a single-step income statement, all revenues are listed first, followed by all expenses. Selling and administrative costs are grouped under operating expenses, which are subtracted from total revenues to calculate net income.

Conclude the correct placement: Selling and administrative costs are reported on the single-step income statement under operating expenses, as they represent costs associated with running the business during the accounting period.