Question

With regard to comprehensive income, how does net income differ in a one statement approach compared to a two statement approach? A Net income in a one statement approach is used to calculate earnings per share, but earnings per share are not reported in a two statement approach. B Net income includes income, expenses, gains, and losses all together in a one statement approach, but income and expenses are separated from gains and losses when calculating net income in a two statement approach. C. Net income is reported as a subtotal in a one statement approach but as a total on a two statement approach. D Net income includes comprehensive income in a one statement approach but not in a two statement approach.

Answer 1

The key difference between the one statement approach and the two statement approach is that in the one statement approach, net income includes all income, expenses, gains, and losses together, while in the two statement approach, net income is calculated as the difference between revenues and gains and expenses and losses.

Step-by-step explanation:

B. Net income includes income, expenses, gains, and losses all together in a one statement approach, but income and expenses are separated from gains and losses when calculating net income in a two statement approach.

In a one statement approach, comprehensive income is reported as a single continuous statement that includes all changes in equity during the period, including both net income and other comprehensive income (OCI). Net income is reported as a single amount that includes all revenues, gains, expenses, and losses that occurred during the period.

In a two statement approach, the income statement reports revenues, gains, expenses, and losses separately from other comprehensive income. Net income is calculated as the difference between total revenues and gains and total expenses and losses. Comprehensive income is reported as a separate statement that includes all other changes in equity that were not included in net income, such as unrealized gains or losses on investments or foreign currency translation adjustments.

Therefore, the key difference between the one statement approach and the two statement approach is that in the one statement approach, net income includes all income, expenses, gains, and losses together, while in the two statement approach, net income is calculated as the difference between revenues and gains and expenses and losses.