Intermediate Accounting

single-step income statement

A form of income statement in which the total of all expenses is deducted from the total of all revenues.

multiple-step income statement

A form of income statement that contains several sections, subsections, and subtotals.

accumulated other comprehensive income

An entry in the stockholders' equity section of the balance sheet that reports the cumulative amounts of Other Comprehensive Income.

capital maintenance approach

An income measurement approach in which a company determines income for the period based on the change in equity, after adjusting for capital contributions or distributions (dividends).

modified all-inclusive concept

Approach, adopted by the accounting profession, that dictates that companies record just about all items, including irregular ones, as part of net income, and that companies must highlight irregular items in the financial statements.

comprehensive income

Change in equity (net assets) of an entity during a period from transactions and other events and circumstances from nonowner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.

prior period adjustments

If errors are found in the previous period's accounting, they cannot be used when calculating the current periods income, so they must be detailed in the retained earning statement.

current operating performance approach

Income-reporting approach that advocates reporting only regular and recurring revenue and expense elements, but not irregular items, in income. (p. 140).

quality of earnings

Indicates the level of full and transparent information that a company provides to users of its financial statements.

other comprehensive income

Non-owner changes in equity during a period that bypass net income. Non-owner changes in equity are all those except investments by owners and distributions to owners. This is closed into Accumulated Other Comprehensive Income at the end of each period

discontinued operation

Occurs when a company eliminates the results of operations and cash flows of a component from its ongoing operations, and there is no significant continuing involvement in that component after the disposal transaction

earnings management

The planned timing of revenues, expenses, gains, and losses to smooth out bumps in net income.

income statement

The summary of a company's revenues and expenses during a certain accounting period. Bottom-line figures represent the company's net income and earnings per share.

extraordinary items

Unusual AND infrequent; major casualty losses, expropriations, prohibitions, and gains and losses on early retirement of debt.

statement of stockholders' equity

a financial statement that presents the factors that caused stockholders' equity to change during the period, including those that caused retained earnings to change

changes in estimates

accounts for changes in estimates in the period of change if they affect only that period, or in the period of change and future periods if the change affects both

transaction approach

method of income measurement that focuses on the income-related activities that have occurred during the period

irregular items

six categories: discontinued operations, extraordinary items, unusual gains and losses, changes in accting principle, changes in estimates, corrections of errors.

intraperiod tax allocation

splits income tax expense between continuing vs nonrecurring activities, so readers know that income from continuing operations may be the best indicator of what next year's net income might be

earnings per share

the amount of net income after federal income tax belonging to a single share of stock