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

When preparing a single-step income statement, which of the following statements is accurate?

Income tax expense is not included in the calculation of net income.

All revenues are grouped together and all expenses are grouped together, with net income calculated as total revenues minus total expenses.

Gross profit is shown as a separate line item before deducting operating expenses.

Operating and non-operating items are reported in separate sections before calculating net income.

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Verified step by step guidance

Step 1: Understand the concept of a single-step income statement. A single-step income statement is a simplified format where all revenues are grouped together and all expenses are grouped together. Net income is calculated as total revenues minus total expenses.

Step 2: Analyze the options provided in the problem. The correct answer should align with the definition and structure of a single-step income statement.

Step 3: Evaluate the first option: 'Income tax expense is not included in the calculation of net income.' This is incorrect because income tax expense is typically included in the calculation of net income.

Step 4: Evaluate the second option: 'All revenues are grouped together and all expenses are grouped together, with net income calculated as total revenues minus total expenses.' This is correct and matches the definition of a single-step income statement.

Step 5: Evaluate the remaining options: 'Gross profit is shown as a separate line item before deducting operating expenses' and 'Operating and non-operating items are reported in separate sections before calculating net income.' Both of these are incorrect because they describe a multi-step income statement, not a single-step income statement.