Which item is NOT one of the five steps of an income statement?

Which item is NOT one of the five steps of an income statement?

• A. Net cash flow
• B. Revenue
• C. COGS
• D. Expenses

Answer: (A)

The income statement focuses on profitability by showing revenues and the expenses that relate to earning that revenue. A common flow on an income statement goes from Revenue, subtracting Cost of Goods Sold to get Gross Profit, then subtracting Operating Expenses to arrive at Net Income. Net cash flow, in contrast, measures actual cash movements—cash received minus cash paid—and belongs on the cash flow statement, not the income statement. So net cash flow isn’t one of the five steps of the income statement, while Revenue, COGS, and Expenses are integral parts of it.

The income statement focuses on profitability by showing revenues and the expenses that relate to earning that revenue. A common flow on an income statement goes from Revenue, subtracting Cost of Goods Sold to get Gross Profit, then subtracting Operating Expenses to arrive at Net Income. Net cash flow, in contrast, measures actual cash movements—cash received minus cash paid—and belongs on the cash flow statement, not the income statement. So net cash flow isn’t one of the five steps of the income statement, while Revenue, COGS, and Expenses are integral parts of it.