Question

The components of the income statement are usually classified as: (Select all that apply.)

a)investing items
b)financing items
c)non-operating items
d)operating items

Answer 1

The income statement components are classified as operating items and non-operating items. Investing and financing items relate to sections of the statement of cash flows, not to the income statement itself.

Step-by-step explanation:

The components of the income statement are typically classified into two main categories: operating items and non-operating items. Operating items include revenues and expenses directly related to the primary business activities of the company. Non-operating items, on the other hand, refer to revenues and expenses that are not directly tied to the core operations, such as investment income or losses and interest expenses.

Investing items and financing items are not usually part of the income statement itself, but they are related concepts. Investing items pertain to the acquisition and disposal of long-term assets and investments, which are part of the cash flows from investing activities in the statement of cash flows. Financing items involve transactions related to equity and debt, and these are listed in the cash flows from financing activities section of the statement of cash flows.