Question

Gross margin can be found on single step income statement.

TRUE              FALSE   

GAAP requires companies to disclose the sales returns and allowance on their Income Statement.

TRUE              FALSE    

Answer 1

Solution. The first given statement is False.

Explanation: Single step income statement encompasses computation of net income or loss during an operating period by listing organization's revenues, gains, expenses and losses. The given statement is false as to reflect gross margin and other detailed information, multi-step income statement has to be prepared and not single-step income statement.

The second given statement is True.

Explanation: An organization operating business needs to prepare financial statements in order to reflect true financial position to sustain under established rules and regulations. GAAP requires companies to disclose sales returns and allowances on their Income Statement adhering to full disclosure principle and accrual basis accounting. For an organization to sustain in today's global competitive economic market, it needs disclosure of financial statements along with footnotes to facilitate decision making purposes for both internal and external users.