Which of the following is a typical component of the income statement?

• A. Net worth
• B. Current liabilities
• C. Operating expenses
• D. Long term assets

Answer: (C)

Operating expenses belong on the income statement because this financial report tracks performance over a period, detailing the costs incurred to run the business and generate revenue. The income statement starts with revenues and subtracts expenses to show what remains as profit. Operating expenses cover the ongoing costs of doing business, such as salaries, rent, utilities, and administrative costs, and they help determine net income after all expenses are accounted for.

The other items are not typical income statement components. Net worth reflects owner’s equity and appears on the balance sheet, not in the income statement. Current liabilities and long-term assets are balance sheet items that show what the company owes and what it owns at a point in time, rather than flows of value over a period.