What are the three major components of a statement of revenue and expense?

• A. Revenue, liabilities, and equity.
• B. Revenue, expenses, and depreciation.
• C. Revenue, expenses, and excess revenue over expenses.
• D. Revenue, expenses, and equity.

Answer: (C)

On an income statement, the focus is on what the association earns and what it spends. The three major parts are revenues, expenses, and the net result that shows how much was left after all expenses are paid—the excess revenue over expenses, which is the net income. Depreciation is simply one type of expense and is included in the total expenses, not treated as a separate major component. Liabilities and equity belong on the balance sheet, not on the revenue-and-expense statement. So the best fit is revenue, expenses, and excess revenue over expenses.