Which financial statement summarizes a company's revenues and expenses to show net income for a specific period, using a single-step approach?

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

Answer: (A)

Verified step by step guidance

1. Understand the purpose of each financial statement: The Single-step Income Statement summarizes revenues and expenses to calculate net income for a specific period. The Balance Sheet shows a company's financial position at a point in time, the Statement of Retained Earnings tracks changes in retained earnings, and the Statement of Cash Flows reports cash inflows and outflows.
2. Focus on the Single-step Income Statement: This approach simplifies the calculation of net income by subtracting total expenses from total revenues without categorizing expenses into operating and non-operating sections.
3. Identify the components of the Single-step Income Statement: Revenues include all income generated from business operations, while expenses include all costs incurred during the period.
4. Understand the calculation process: Net income is calculated using the formula: $\mathrm{Net} \mathrm{Income}=\mathrm{Total} \mathrm{Revenues} - \mathrm{Total} \mathrm{Expenses}$. This straightforward approach avoids detailed classifications.
5. Recognize the reporting period: The Single-step Income Statement is prepared for a specific period, such as a month, quarter, or year, to provide a snapshot of financial performance during that time.