Which of the following statements is correct?
A) The term single-step income statement is sometimes used to describe a classified income statement.
B) If a business is to earn a net income,the gross profit on sales must be greater than operating expenses.
C) Salaries of office employees would be grouped with the selling expenses in the Operating Expenses section of the income statement.
D) Sales less Operating Expenses equals Gross Profit.

Question

Quizplus · Accepted Answer

In order for a business to earn a net income, its gross profit on sales must be greater than its operating expenses. This is because the formula for calculating net income is:

Net Income = Gross Profit - Operating Expenses - Other Expenses

Therefore, if gross profit is not greater than operating expenses, the company will not have any net income.

A) The term single-step income statement is used to describe an income statement that only lists total revenues and expenses, without any subtotals or classifications. 
C) Salaries of office employees would typically be classified as administrative expenses, not selling expenses. 
D) Gross profit is calculated by subtracting cost of goods sold from net sales, not operating expenses.

Which of the Following Statements Is Correct