Which types of accounts are reported on the income statement?

• A. Revenues and expenses
• B. Liabilities and expenses
• C. Assets and owner's equity
• D. Assets and liabilities

Answer: (A)

Verified step by step guidance

1. Understand the purpose of the income statement: The income statement is a financial report that summarizes a company's revenues and expenses over a specific period, showing the net income or loss.
2. Identify the types of accounts that are relevant to the income statement: The income statement focuses on accounts that measure a company's performance, specifically revenues (income earned) and expenses (costs incurred).
3. Eliminate irrelevant account types: Assets, liabilities, and owner's equity are reported on the balance sheet, not the income statement. These accounts represent the financial position of the company, not its performance.
4. Match the correct account types to the income statement: Revenues and expenses are the two types of accounts that are reported on the income statement because they directly impact the calculation of net income or loss.
5. Conclude that the correct answer is 'Revenues and expenses,' as these are the accounts that provide the necessary information for the income statement.