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

Net Sales

Financial Accounting

4. Merchandising Operations

Net Sales

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Which two types of expenses are typically recorded on the income statement?

Depreciation Expense and Inventory Purchases

Income Tax Expense and Retained Earnings

Cost of Goods Sold and Operating Expenses

Interest Expense and Dividends Paid

Previous problemNext problem

Verified step by step guidance

Understand the purpose of the income statement: It is a financial report that shows a company's revenues, expenses, and profits over a specific period. The goal is to identify expenses that directly impact the company's profitability.

Review the types of expenses listed in the problem: Depreciation Expense, Inventory Purchases, Income Tax Expense, Retained Earnings, Cost of Goods Sold, Operating Expenses, Interest Expense, and Dividends Paid.

Clarify the nature of each expense: Depreciation Expense is a non-cash expense related to the allocation of the cost of tangible assets over their useful lives. Inventory Purchases are not directly recorded on the income statement but are part of the calculation of Cost of Goods Sold. Income Tax Expense is a direct expense on the income statement, while Retained Earnings are part of the equity section of the balance sheet. Cost of Goods Sold represents the direct costs of producing goods sold by the company, and Operating Expenses include costs related to running the business. Interest Expense is a financing cost, and Dividends Paid are distributions to shareholders, not expenses.

Focus on the correct answer: Cost of Goods Sold and Operating Expenses are typically recorded on the income statement because they represent the direct and indirect costs associated with generating revenue during the period.

Conclude by emphasizing the distinction: Expenses like Depreciation Expense, Income Tax Expense, and Interest Expense may also appear on the income statement, but Dividends Paid and Retained Earnings are not considered expenses and are not recorded on the income statement.