Which of the following best describes what a single-step income statement represents?

• A. A statement that separates operating and non-operating activities to calculate gross profit.
• B. A statement that details changes in equity accounts over a period.
• C. A financial statement that shows total revenues and total expenses to determine net income in a single calculation.
• D. A report that only lists cash inflows and outflows for a period.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of a single-step income statement. It is a simplified financial statement that calculates net income by subtracting total expenses from total revenues in a single calculation, without separating operating and non-operating activities.
2. Step 2: Compare the given options to the definition of a single-step income statement. Eliminate options that do not align with the concept.
3. Step 3: Option A describes separating operating and non-operating activities, which is characteristic of a multi-step income statement, not a single-step income statement.
4. Step 4: Option B refers to changes in equity accounts, which is related to the statement of changes in equity, not the single-step income statement.
5. Step 5: Option D mentions cash inflows and outflows, which is characteristic of the cash flow statement, not the single-step income statement. Therefore, the correct description is the one that matches the definition of a single-step income statement: 'A financial statement that shows total revenues and total expenses to determine net income in a single calculation.'