Which of the following best describes the main characteristic of a single-step income statement?

• A. It separates operating and non-operating activities, showing gross profit and operating income.
• B. It lists expenses by function, such as cost of goods sold, selling, and administrative expenses.
• C. It reports income tax expense before operating income.
• D. It groups all revenues together and all expenses together, subtracting total expenses from total revenues to determine net income.

Answer: (D)

Verified step by step guidance

1. Understand the concept of a single-step income statement: A single-step income statement is a simplified format that groups all revenues together and all expenses together, without separating operating and non-operating activities.
2. Recognize the main characteristic: Unlike a multi-step income statement, the single-step format does not show gross profit or operating income separately. Instead, it focuses on the total revenues and total expenses.
3. Identify the calculation process: To determine net income, subtract total expenses from total revenues. This straightforward approach avoids categorizing expenses by function or reporting income tax expense separately.
4. Compare with other formats: Note that multi-step income statements provide more detailed information, such as separating operating and non-operating activities, showing gross profit, and listing expenses by function. The single-step format is simpler and less detailed.
5. Conclude the main characteristic: The single-step income statement is characterized by grouping all revenues together and all expenses together, then subtracting total expenses from total revenues to calculate net income.