Which types of accounts are typically reported on an income statement?

• A. Revenue and expense accounts (including gains and losses)
• B. Only cash receipts and cash payments from operating activities
• C. Asset, liability, and equity accounts
• D. Only accounts related to owners' investments and dividends

Answer: (A)

Verified step by step guidance

1. Understand the purpose of the income statement: it reports a company's financial performance over a specific period, focusing on how much revenue was earned and what expenses were incurred.
2. Identify the types of accounts that reflect this performance: revenue accounts record income earned from sales or services, while expense accounts record costs incurred to generate that revenue.
3. Recognize that gains and losses, which arise from incidental transactions (like selling an asset), are also included because they affect net income.
4. Exclude accounts related to cash flows (cash receipts and payments), as these are reported in the statement of cash flows, not the income statement.
5. Exclude asset, liability, and equity accounts, as these are reported on the balance sheet, and accounts related to owners' investments and dividends, which are part of equity and reported in the statement of changes in equity.