Multiple Choice
Which financial report displays a business's profit and loss in a summarized, single-step format?
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4. Merchandising Operations
Single-step Income Statement
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Which of the following accounts would be reported on a single-step income statement?
A
Dividends
B
Service Revenue
C
Accounts Receivable
D
Prepaid Insurance
Verified step by step guidance1
Understand the purpose of a single-step income statement: It is a simplified income statement that reports revenues and expenses in a single section, without separating operating and non-operating activities.
Identify the types of accounts that appear on a single-step income statement: Only revenue and expense accounts are included. Asset, liability, and equity accounts are excluded.
Analyze each account provided in the problem: Dividends are equity accounts, Accounts Receivable and Prepaid Insurance are asset accounts, and Service Revenue is a revenue account.
Determine which account fits the criteria for inclusion in a single-step income statement: Since Service Revenue is a revenue account, it is the only account that would be reported on the single-step income statement.
Conclude that Service Revenue is the correct answer because it represents income earned by the business, which is relevant to the income statement.
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