An income statement may be represented as follows:
A) Sales - Liabilities = Profits.
B) Revenues - Liabilities = Net Income.
C) Sales - Expenses = Retained Earnings.
D) Sales - Expenses = Profits.

Question

Quizplus · Accepted Answer

An income statement shows the revenues (or sales) generated by a company and subtracts any expenses incurred to arrive at the net income or profit for the period. Therefore, the correct formula for an income statement is Sales/Revenues - Expenses = Net Income/Profit. Option D correctly represents this formula.

An Income Statement May Be Represented as Follows