5. Statement of Comprehensive Income Flashcards
A structured Financial Statement that shows the financial performance of a business entity for a given period.
Statement of Comprehensive Income
Describe Income
- increases in economic benefits in the form of inflows
- enhancement of assets
- decreases of liabilities
- increases in equity (other than those relating to contributions from equity participants)
Describe Expenses
- decreases in economic benefits in the form of outflows
- depletion
- incurrences of liabilities
- decrease in equity (other than those relating to distribution to equity participants)
It is probable that any future economic benefit associated with the item will flows to or from the entity and the item has a cost or value that can be measured with reliability.
Recognition of Incomes and Expenses
True or False:
In Cash basis, Income is recognized when revenue has been earned already where it can be measured reliably and has some sufficient degree of certainty.
False : Accrual basis
True or False:
In Accrual basis, Expense is recognized when it’s incurred already where it can be measured reliably and has some
sufficient degree of certainty.
True
Methods of Recognizing Expense
(1) Matching cost with revenue
(2) Systematic and Rational Allocation
(3) Immediate Recognition
(4) Non-matching Principle
Approach in the Determination of Profit
(1) Capital Maintenance Approach
a.) Financial Capital Maintenance
b.) Physical Capital Maintenance
(2) Transaction Approach
is the traditional method of determining net income or profit in accordance with the Philippines Accounting Standards
Transaction Approach
Arises in the course of the ordinary activities of an entity and is referred to by a variety of different names.
It includes sales, fees, interests, dividends, royalties,
and rent.
Revenue
Represent other items that meet the definition of income and may or may not arise in the course of the ordinary activities of an entity.
Gains
represent increases in economic benefits and as such are not different in nature from revenue.
Gains
True or False:
Gains may arise from the disposal of non – current assets.
True
True or False:
Gains are presented separately in the income statement
True
Encompasses losses as well as those expenses that arise in the course of the ordinary activities of the entity.
Expenses
represent other items that meet the definition of expenses and may or may not arise in the course of the ordinary activities of an entity.
Losses
True or False:
PAS 1, paragraph 99, provides that an entity shall present an analysis or expenses recognized in profit or loss using a classification based on either the function of expenses or their
nature within the entity, whichever provides information that is
reliable and more relevant.
True
The income statement may be presented in two ways, namely;
(1) Functional
(2) Natural
Under this method, expenses are aggregated according to their nature.
Nature of Expense Method
Under this method, an entity classifies expenses according to their function (cost of sales, distribution costs, administrative costs, and other functional classifications)
Function of Expense Method
True or False:
Presenting income statement separately is not allowed provided it a separate comprehensive income will be presented.
False ; allowed
Two Presentation of Statement of Comprehensive Income
(1) Single Statement of profit and loss and other comprehensive income statement
(2) Two Statement: Comprising
a.) statement of profit or loss
b.) statement of comprehensive
income
is income less expense, excluding components of other comprehensive income
Profit or Loss
True or False:
Income and expenses are usually recognized in profit or loss unless:
a. They are items of other comprehensive income; or
b. They are required by other PFRS to be recognized outside of profit or loss.
Both are True
Profit or loss section shows line items that present the following amounts for the period:
►Revenue presenting, separately interest revenue.
► Finance costs
► Gains and losses arising from derecognition of financial assets at
amortized costs.
► Impairment losses and impairment gains on financial assets.
► Gains and losses on reclassification of financial assets from amortized cost
or fair value through profit other comprehensive income to fair value
through profit or loss.
► Share in the profit or loss of associate and joint ventures.
► Tax expenses; and
► Result of discontinued operations.
