Which financial statement provides a summary that shows how much money a business has made or lost during a specific period using a single-step approach?

• A. Statement of Cash Flows
• B. Statement of Retained Earnings
• C. Balance Sheet
• D. Single-step Income Statement

Answer: (D)

Verified step by step guidance

1. Understand the purpose of the Single-step Income Statement: It is a financial statement that summarizes revenues and expenses to calculate net income or net loss for a specific period.
2. Recognize the structure of the Single-step Income Statement: It uses a straightforward approach where all revenues are listed first, followed by all expenses, and the difference between the two is calculated to determine net income or net loss.
3. Compare the Single-step Income Statement to other financial statements: Unlike the Statement of Cash Flows, which tracks cash inflows and outflows, or the Balance Sheet, which shows the financial position at a specific point in time, the Single-step Income Statement focuses solely on profitability during a period.
4. Identify the components of the Single-step Income Statement: Revenues include sales, service income, and other income sources, while expenses include costs like salaries, rent, utilities, and other operating expenses.
5. Understand the calculation process: The formula for net income or net loss is \( \text{Net Income (or Loss)} = \text{Total Revenues} - \text{Total Expenses} \). This simple calculation is the hallmark of the single-step approach.