Question

Q2. Which one of the following is correct for Income Statements? [1 pt]

1. An Income Statement does NOT have a line item titled “cost of goods sold”
2. An Income Statement does NOT have a line item titled “operating profit”
3. An Income Statement has a line item titled “assets”
4. An Income Statement has a line item titled “income taxes”
5. An Income Statement has a line item titled “accounts receivable”

Answer 1

Income tax statement shows the summary of the various accounts of incomes and expenses , this involves the cost of goods sold, operating profit , non operating income , income taxes etc. The analysis of the options will be as follows:

a) An Income Statement does NOT have a line item titled “cost of goods sold” - this statement is not correct as income statement has a line item title cost of goods sold.

b) An Income Statement does NOT have a line item titled “operating profit" - this statement is not correct as income statement has a line item title operating profit.

c) An Income Statement has a line item titled “assets" - this statement is not correct as Income statement does not has a line item titled assets , but assets goes in balance sheet.

d) An Income Statement has a line item titled “income taxes" - This statement is correct as income tax is shown in income statement.

e) An Income Statement has a line item titled “accounts receivable" - his statement is not correct as Income statement does not has a line item titled 'accounts receivable' , but assets goes in balance sheet.

Thus the correct option is --------------D i.e An Income Statement has a line item titled “income taxes"