Multiple Choice
Which of the following accounts will be found on a single-step income statement?
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4. Merchandising Operations
Single-step Income Statement
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Which of the following terms is also commonly used as a heading for a single-step income statement?
A
Statement of Earnings
B
Statement of Financial Position
C
Statement of Retained Earnings
D
Statement of Cash Flows
Verified step by step guidance1
Understand the purpose of a single-step income statement: It is a financial statement that reports a company's revenues and expenses in a straightforward manner, subtracting total expenses from total revenues to determine net income.
Recognize that the single-step income statement is often referred to by alternative names. One common alternative name is 'Statement of Earnings,' which emphasizes the focus on the company's profitability.
Eliminate the other options based on their definitions: 'Statement of Financial Position' refers to the balance sheet, which shows assets, liabilities, and equity. 'Statement of Retained Earnings' details changes in retained earnings over a period. 'Statement of Cash Flows' reports cash inflows and outflows.
Confirm that 'Statement of Earnings' aligns with the purpose and structure of a single-step income statement, as it directly relates to reporting earnings or net income.
Conclude that the correct term commonly used as a heading for a single-step income statement is 'Statement of Earnings.'
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