Multiple Choice
Which of the following best describes a single-step income statement as compared to a contribution format income statement?
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Single-step Income Statement
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Which of the following statements is true regarding a single-step income statement?
A
It reports variable costs separately from fixed costs.
B
It reports all revenues together and all expenses together, without separating variable and fixed costs.
C
It presents gross profit as a separate line item.
D
It distinguishes between operating and non-operating expenses in separate sections.
Verified step by step guidance1
Understand the concept of a single-step income statement: A single-step income statement is a simplified format that aggregates all revenues and all expenses into two main categories, without distinguishing between operating and non-operating expenses or separating variable and fixed costs.
Review the structure of a single-step income statement: It typically includes two sections—revenues and expenses. Revenues are summed up, and expenses are subtracted to calculate net income.
Clarify the difference between single-step and multi-step income statements: Unlike a multi-step income statement, which presents gross profit and separates operating and non-operating expenses, a single-step income statement does not provide these distinctions.
Analyze the options provided in the problem: Evaluate each statement to determine whether it aligns with the characteristics of a single-step income statement. For example, the statement 'It reports all revenues together and all expenses together, without separating variable and fixed costs' is consistent with the single-step format.
Conclude by identifying the correct statement: Based on the analysis, the correct answer is the one that accurately describes the single-step income statement format, which aggregates all revenues and expenses without further categorization.
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