In a single-step income statement, what does gross profit minus operating expenses equal?

• A. Total revenues
• B. Net income
• C. Gross margin
• D. Income from operations

Answer: (B)

Verified step by step guidance

1. Understand the structure of a single-step income statement: In this format, all revenues are grouped together, and all expenses are grouped together. The difference between total revenues and total expenses is the net income.
2. Identify the components mentioned in the problem: Gross profit is the difference between total revenues and the cost of goods sold (COGS). Operating expenses include costs such as salaries, rent, utilities, and other expenses related to running the business.
3. Recognize the relationship between gross profit and operating expenses: Subtracting operating expenses from gross profit gives the remaining income after covering the costs of operations.
4. Connect the result to the term 'Net Income': In a single-step income statement, net income is calculated as total revenues minus total expenses. Since operating expenses are part of total expenses, subtracting them from gross profit leads to net income.
5. Conclude that the correct answer is 'Net Income': Gross profit minus operating expenses equals net income, as this represents the final profit after accounting for all operating costs.