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

In a single-step income statement, what does gross profit minus operating expenses equal?

Total revenues

Net income

Gross margin

Income from operations

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Understand the structure of a single-step income statement: In this format, all revenues are grouped together, and all expenses are grouped together. The difference between total revenues and total expenses is the net income.

Identify the components mentioned in the problem: Gross profit is the difference between total revenues and the cost of goods sold (COGS). Operating expenses include costs such as salaries, rent, utilities, and other expenses related to running the business.

Recognize the relationship between gross profit and operating expenses: Subtracting operating expenses from gross profit gives the remaining income after covering the costs of operations.

Connect the result to the term 'Net Income': In a single-step income statement, net income is calculated as total revenues minus total expenses. Since operating expenses are part of total expenses, subtracting them from gross profit leads to net income.

Conclude that the correct answer is 'Net Income': Gross profit minus operating expenses equals net income, as this represents the final profit after accounting for all operating costs.