Expenses are shown on the:

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

Answer: (D)

Verified step by step guidance

1. Understand the concept of expenses: Expenses represent the costs incurred by a business in its operations to generate revenue. Examples include rent, salaries, utilities, and cost of goods sold.
2. Identify the purpose of the Income Statement: The Income Statement is a financial report that shows a company's revenues, expenses, and profits over a specific period. It is also known as the Profit and Loss Statement.
3. Recognize where expenses are reported: Expenses are listed on the Income Statement to calculate net income (or net loss). The formula for net income is: Net Income = Revenues - Expenses.
4. Differentiate the other financial statements: The Balance Sheet shows assets, liabilities, and equity at a specific point in time. The Statement of Retained Earnings tracks changes in retained earnings, and the Statement of Cash Flows reports cash inflows and outflows. None of these directly list expenses.
5. Conclude that expenses are reported on the Income Statement because it is the financial statement designed to reflect the company's operational performance, including costs incurred during the period.