Chapter 4: The Income Statement

Question 1

The process that accountants use in adjusting raw transaction data into refined measures of a firm’s economic performance

Answer 1

Accrual Accounting

Question 2

The number used to reflect an overall measure of the change in a company’s wealth during the period

Answer 2

Comprehensive Income

Question 3

When a business sells goods to customers, this is recorded as an expense

Answer 3

Cost of Goods Sold

Question 4

Report the hughes results in a separate category

Answer 4

Discontinued Operations

Question 5

The amount of net income associated with each share of stock

Answer 5

Earnings Per Share (EPS)

Question 6

A system of earnings-based compensation

Answer 6

Economic Value Added

Question 7

Expanded Accounting Equation

Answer 7

Assets=Liabilities+Paid-in Capital + (Revenues-Expenses-Dividends)

Question 8

The value of resources used in generating the reported revenue

Answer 8

Expenses

Question 9

Gains and losses that result from transactions that are both unusual in nature and infrequent in occurrence

Answer 9

Extraordinary Items

Question 10

The approach that accountants typically use in computing a company’s income is the first option described above in which inflation is ignored and a company is said to have income when its financial resources increase

Answer 10

Financial Capital Maintenance

Question 11

The amount a company makes money on activities that are peripheral to its primary operations

Answer 11

Gain

Question 12

The difference between the selling price of the product and the cost of the product

Answer 12

Gross Profit

Question 13

The segments of a company’s business that it considers to be normal, and expects to operate in for the foreseeable future

Answer 13

Income from Continuing Operations

Question 14

The amount a company loses money of activities that are peripheral to its primary operations

Answer 14

Loss

Question 15

The concept typically used in practice to determine when an expense should be recognized

Answer 15

Matching

Question 16

Includes multiple sub-totals within the income statement

Answer 16

Multiple-step Income Statement

Question 17

The accountant’s attempt to summarize in one number the overall economic performance of a company for a given period

Answer 17

Net Income

Question 18

The performance of the fundamental business operations conducted by a company

Answer 18

Operating Income

Question 19

Income is earned only when one experiences an increase in actual physical resources

Answer 19

Physical Capital Maintenance

Question 20

The fact that companies have exercised considerable discretion in determining the amount and timing of a restructuring charge.

Answer 20

Restructuring Charges

Question 21

The value of the goods and services provided by a company in its business operations

Answer 21

Revenue

Question 22

A cornerstone of accrual accounting together with matching principle. They both determine the accounting period, in which revenues and expenses are recognized

Answer 22

Revenue Recognition

Question 23

With this format, all revenues are grouped together, all expenses are grouped together, and net income is computed as the difference between total revenues and total expenses

Answer 23

Single-Step Income Statement