Which financial statement summarizes revenues and expenses to determine net income or loss in a single step?

• A. Statement of Cash Flows
• B. Single-step Income Statement
• C. Balance Sheet
• D. Statement of Retained Earnings

Answer: (B)

Verified step by step guidance

1. Understand the purpose of each financial statement: The Statement of Cash Flows shows cash inflows and outflows, the Balance Sheet provides a snapshot of assets, liabilities, and equity, and the Statement of Retained Earnings tracks changes in retained earnings. The Single-step Income Statement summarizes revenues and expenses to determine net income or loss.
2. Recognize that the Single-step Income Statement is designed to simplify the calculation of net income or loss by subtracting total expenses from total revenues in one step.
3. Identify the components of the Single-step Income Statement: Revenues (e.g., sales revenue, service revenue) and Expenses (e.g., cost of goods sold, operating expenses). These are grouped into two categories for simplicity.
4. Understand the formula used in the Single-step Income Statement: \( \text{Net Income (or Loss)} = \text{Total Revenues} - \text{Total Expenses} \). This formula is applied directly to summarize the financial performance.
5. Conclude that the Single-step Income Statement is the correct answer because it directly summarizes revenues and expenses to determine net income or loss in a single calculation.