Which of the following is the primary purpose of a single-step income statement?

• A. To report the changes in owner's equity during the period
• B. To provide a detailed breakdown of operating and non-operating expenses
• C. To present the company's cash inflows and outflows
• D. To show the net income or net loss of a company for a specific period

Answer: (D)

Verified step by step guidance

1. Understand the concept of a single-step income statement: It is a simplified financial statement that calculates net income or net loss by subtracting total expenses from total revenues without categorizing operating and non-operating activities.
2. Recognize the primary purpose of the single-step income statement: Its main goal is to provide a clear and straightforward presentation of the company's financial performance over a specific period.
3. Compare the single-step income statement to other financial statements: Unlike the multi-step income statement, which separates operating and non-operating activities, the single-step format focuses solely on the net result (net income or net loss).
4. Identify the correct answer: The single-step income statement is designed to show the net income or net loss of a company for a specific period, which is its primary purpose.
5. Avoid confusion with other financial statements: For example, changes in owner's equity are reported in the statement of changes in equity, and cash inflows/outflows are detailed in the statement of cash flows.