Which item would not appear on an income statement?

Which item would not appear on an income statement?

• A. Revenue
• B. Cost of goods sold
• C. Net income
• D. Inventory on hand

Answer: (D)

The income statement shows how much money the business earned and spent over a period: revenue from jobs, the costs tied to delivering those jobs (cost of goods sold), other expenses, and the resulting net income. Inventory on hand, however, is an asset you own at a point in time. It sits on the balance sheet, not the income statement. You only recognize the cost of that inventory on the income statement when you actually use or sell it, which is recorded as cost of goods sold in the period you sell it. This follows the matching principle, linking the expense to the revenue it helps generate. So the item that would not appear on an income statement is inventory on hand.

The income statement shows how much money the business earned and spent over a period: revenue from jobs, the costs tied to delivering those jobs (cost of goods sold), other expenses, and the resulting net income. Inventory on hand, however, is an asset you own at a point in time. It sits on the balance sheet, not the income statement. You only recognize the cost of that inventory on the income statement when you actually use or sell it, which is recorded as cost of goods sold in the period you sell it. This follows the matching principle, linking the expense to the revenue it helps generate. So the item that would not appear on an income statement is inventory on hand.