NOCTI Accounting Foundations Practice Test

Which statement shows revenues and expenses for a period, resulting in net income?

A balance of accounts at end. A summary of net worth. A financial statement showing revenues and expenses for a period, resulting net income. A cash inflows/outflows ledger.

Correct Answer:

A financial statement showing revenues and expenses for a period, resulting net income.

Explanation:

Revenues and expenses over a specific period are summarized in the income statement. This report lists all the revenues earned and expenses incurred during the period and subtracts expenses from revenues to produce net income (or a net loss). It shows how well the business performed over that span, not just a snapshot at one moment in time. This differs from a balance sheet, which shows assets, liabilities, and owners’ equity at a single date; a summary of net worth, which reflects changes in equity rather than operating results over a period; and a cash inflows/outflows ledger, which tracks actual cash movements and is the cash flow statement. The statement that directly shows revenues, expenses, and the resulting net income is the income statement.

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