Which of the following would be included in a business's income statement?

• A. Cash balance at year-end
• B. Revenue from sales
• C. Owner's equity
• D. Total assets

Answer: (B)

Verified step by step guidance

1. Understand the purpose of an income statement: It is a financial report that shows a business's revenues, expenses, and net income or loss over a specific period. It does not include items like cash balance, owner's equity, or total assets, which are part of other financial statements such as the balance sheet.
2. Identify the correct category: Revenue from sales is a key component of the income statement because it represents the income generated from the primary operations of the business during the reporting period.
3. Clarify why other options are excluded: Cash balance at year-end is part of the balance sheet under assets, owner's equity is part of the equity section of the balance sheet, and total assets are also part of the balance sheet under assets. These items are not related to the income statement.
4. Focus on the structure of the income statement: The income statement typically includes revenues (like sales revenue), expenses (like cost of goods sold and operating expenses), and calculates net income or loss by subtracting expenses from revenues.
5. Conclude with the correct answer: Revenue from sales is included in the income statement because it directly contributes to the calculation of net income or loss for the business during the reporting period.