Which of the following accounts are included in an income statement?
A) Land, Salaries Payable
B) Owner’s Name, Capital, Owner’s Contribution
C) Furniture, Cash
D) Service Revenue, Utilities Expense
The correct answer and explanation is:
The correct answer is D) Service Revenue, Utilities Expense.
An income statement reports a company’s financial performance over a specific period. It includes revenue and expenses, which are used to calculate the net income or loss for that period.
- Service Revenue represents the money earned from providing services to customers. It is one of the main sources of income for service-oriented businesses and appears at the top of the income statement.
- Utilities Expense refers to the costs incurred for using utilities, such as electricity, water, and gas. This expense is subtracted from the revenue to calculate the company’s profitability.
The other options do not belong on the income statement:
- A) Land, Salaries Payable: Land is an asset and appears on the balance sheet, not the income statement. Salaries Payable is a liability, and liabilities are also reported on the balance sheet.
- B) Owner’s Name, Capital, Owner’s Contribution: These terms refer to equity-related accounts that show the owner’s investment and withdrawals from the business. They appear on the balance sheet, not the income statement.
- C) Furniture, Cash: Furniture is an asset, and cash is a current asset. Both of these would appear on the balance sheet as part of the company’s resources.
The primary goal of an income statement is to show whether a company is profitable over a specific time period, and it includes revenues (like service revenue) and expenses (like utilities expense). The income statement helps stakeholders, including managers and investors, understand the company’s financial health and operational efficiency.