Net income or net loss is reported on which financial statement?

• A. Balance Sheet
• B. Cash Flow Statement
• C. Income Statement
• D. Statement of Changes in Equity

Answer: (C)

The main idea being tested is where net income or net loss is presented. It appears on the income statement, which summarizes revenues and expenses over a period and shows the resulting profit or loss. This statement is often called the profit and loss statement. The other statements have different primary purposes: the balance sheet shows assets, liabilities, and equity at a point in time (and is affected by net income through retained earnings, but does not present net income itself); the cash flow statement shows cash movements and reconciles to net income; and the statement of changes in equity shows changes in equity accounts, including how net income affects retained earnings, rather than reporting net income as its main line. So, the income statement is where net income or net loss is reported.