Chapter four Income statement

Comprehensive income can be reported in one of two ways:

(1) in a single, continuous statement of comprehensive income or (2) in two separate but consecutive statements—an income statement and a statement of comprehensive income that begins with net income and then reports OCI items to combine for comprehensive income.

What expense is such a major expense that it is listed as its own expense on the income statement?

Income taxes represent a major expense to a corporation, and accordingly, income tax expense is given special treatment in the income statement.Income tax expense is shown as a separate expense in the income statement.

The income statement

displays a company's operating performance, that is, its net profit or loss, during the reporting period.

The income statement and statement of cash flows report changes that occurred

during a particular reporting period.

matching principle

expenses are recognized in the same period as the related revenues.

Operating income

includes revenues and expenses directly related to the primary revenue-generating activities of the company.

Income from continuing operations

includes the revenues, expenses, gains and losses that will probably continue in future periods .excluding those related to discontinued operations and extraordinary items.

what is a primary advantage of the multiple-step income statement format

is that, by separately classifying operating and non-operating items, it provides information that might be useful in analyzing trends. Similarly, the classification of expenses by function also provides useful information.

What does Comprehensive income includes

net income as well as a few gains and losses that are not part of net income and are considered other comprehensive income items instead.

what else is the income statement called

statement of operations or statement of earnings

The purpose of the statement of cash flows

to provide information about the cash receipts and cash disbursements of an enterprise that occurred during the period.

The purpose of the income statement

to summarize the profit-generating activities that occurred during a particular reporting period.

Comprehensive income

traditional net income plus other non owner changes in equity.

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Non operating income relates to peripheral or incidental activities of the company. For example, a manufacturer would include interest and dividend revenue, gains and losses from selling investments, and interest expense in non-operating income. Other income (expense) often is the classification heading companies use in the income statement for non-operating items.

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Non-operating revenues, expenses, gains and losses, and income tax expense (called Income tax provision) are added to or subtracted from operating income to arrive at net income.

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The single-step format first lists all the revenues and gains included in income from continuing operations. Then, expenses and losses are grouped, subtotaled, and subtracted—in a single step—from revenues and gains to derive income from continuing operations. In a departure from that, though, companies usually report income tax expense as a separate last item in the statement. Operating and non operating items are not separately classified.

Expenses

are outflows of resources incurred while generating revenue. They represent the costs of providing goods and services.

Other comprehensive income

certain gains and losses that are excluded from the calculation of net income, but included in the calculation of comprehensive income.

Taxable income

comprises revenues, expenses, gains, and losses as measured according to the regulations of the appropriate taxing authority.

Losses

decreases in equity arising from peripheral, or incidental, transactions of the entity.

how does the The multiple-step income statement format report income from continuing income

reports a series of intermediate subtotals such as gross profit, operating income, and income before taxes before arriving at income from continuing operations.

what is a primary advantage of the single-step income statement format

simplicity.Revenues and expenses are not classified or prioritized.