Based on the sample financial statements for Coca Cola, which of the following best describes the primary purpose of the income statement?

• A. To summarize the company's cash inflows and outflows from operating, investing, and financing activities.
• B. To show the company's financial position at a specific point in time, including assets, liabilities, and equity.
• C. To report the company's revenues and expenses over a specific period, resulting in net income or loss.
• D. To detail the changes in shareholders' equity during the reporting period.

Answer: (C)

Verified step by step guidance

1. Step 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, resulting in net income or net loss. It does not focus on cash flows, financial position, or changes in shareholders' equity.
2. Step 2: Compare the given options to the purpose of the income statement. Eliminate options that describe other financial statements, such as the cash flow statement, balance sheet, or statement of shareholders' equity.
3. Step 3: Option 1 describes the cash flow statement, which focuses on cash inflows and outflows from operating, investing, and financing activities. This is not the purpose of the income statement.
4. Step 4: Option 2 describes the balance sheet, which shows the company's financial position at a specific point in time, including assets, liabilities, and equity. This is also not the purpose of the income statement.
5. Step 5: Option 4 describes the statement of shareholders' equity, which details changes in equity during the reporting period. The correct answer is Option 3, as it aligns with the purpose of the income statement: to report revenues and expenses over a specific period, resulting in net income or loss.