Which of the following would NOT be included on a company's income statement?

• A. Retained earnings (ending balance)
• B. Service revenue
• C. Depreciation expense
• D. Income tax expense

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the purpose of the income statement. The income statement reports a company's financial performance over a specific period, showing revenues, expenses, and resulting net income or loss.
2. Step 2: Identify typical components of the income statement. These include revenues (e.g., service revenue), expenses (e.g., depreciation expense, income tax expense), and the calculation of net income.
3. Step 3: Recognize that retained earnings (ending balance) is a balance sheet item, not an income statement item. It represents accumulated net income retained in the business after dividends, shown as part of shareholders' equity.
4. Step 4: Compare each option to the income statement components: service revenue, depreciation expense, and income tax expense are all income statement items, while retained earnings (ending balance) is not.
5. Step 5: Conclude that retained earnings (ending balance) would NOT be included on the income statement because it is reported on the balance sheet, reflecting cumulative earnings rather than a period's performance.