In financial accounting, the income statement primarily reports which types of accounts?

• A. Liability and equity accounts only
• B. Asset and liability accounts
• C. Asset and equity accounts only
• D. Revenue and expense accounts (including gains and losses)

Answer: (D)

Verified step by step guidance

1. Understand the purpose of the income statement: it summarizes a company's financial performance over a specific period by reporting revenues, expenses, gains, and losses.
2. Recall the types of accounts in financial accounting: assets, liabilities, equity, revenues, expenses, gains, and losses.
3. Recognize that the income statement focuses on accounts that affect net income, which are revenues and expenses (including gains and losses).
4. Note that asset, liability, and equity accounts are reported on the balance sheet, not the income statement.
5. Conclude that the income statement primarily reports revenue and expense accounts, reflecting the company's profitability during the period.