Multiple Choice
Which type of income statement provides a summary of revenues and expenses without detailing individual components?
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4. Merchandising Operations
Single-step Income Statement
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Which of the following accounts are typically found on a single-step income statement?
A
Revenues and expenses
B
Assets and liabilities
C
Cash and accounts receivable
D
Owner's equity and dividends
Verified step by step guidance1
Understand the purpose of a single-step income statement: It is a financial statement that reports the revenues and expenses of a business to calculate net income or loss for a specific period. It does not include accounts related to the balance sheet, such as assets, liabilities, or equity.
Identify the components of a single-step income statement: The statement typically includes two main sections—revenues and expenses. Revenues represent the income earned from business operations, while expenses represent the costs incurred to generate those revenues.
Eliminate irrelevant accounts: Assets, liabilities, cash, accounts receivable, owner's equity, and dividends are not part of the single-step income statement. These accounts are found on the balance sheet or statement of retained earnings.
Focus on the correct accounts: Revenues and expenses are the only accounts that are typically found on a single-step income statement. These are used to calculate the net income by subtracting total expenses from total revenues.
Conclude the reasoning: Since the single-step income statement is designed to provide a straightforward calculation of net income, only revenues and expenses are included. Other accounts listed in the options belong to different financial statements.
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