Multiple Choice
Which accounting record summarizes a business’s profit or loss for a previous year using a single-step approach?
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4. Merchandising Operations
Single-step Income Statement
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
On which of the following financial statements does net income appear?
A
Income Statement
B
Statement of Retained Earnings
C
Balance Sheet
D
Statement of Cash Flows
Verified step by step guidance1
Understand the concept of net income: Net income is the profit or loss of a company after all revenues and expenses have been accounted for during a specific period.
Identify the financial statements: The four primary financial statements are the Income Statement, Statement of Retained Earnings, Balance Sheet, and Statement of Cash Flows.
Determine where net income is reported: Net income is first calculated and reported on the Income Statement, as it represents the company's profitability for the period.
Trace the flow of net income: Net income is then carried over to the Statement of Retained Earnings, where it is used to calculate the ending retained earnings after accounting for dividends.
Understand its indirect impact on other statements: While net income does not directly appear on the Balance Sheet or Statement of Cash Flows, it influences these statements. For example, net income affects retained earnings on the Balance Sheet and is a component of operating activities in the Statement of Cash Flows.
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