Chapter 4: The Income Statement Flashcards
The process that accountants use in adjusting raw transaction data into refined measures of a firm’s economic performance
Accrual Accounting
The number used to reflect an overall measure of the change in a company’s wealth during the period
Comprehensive Income
When a business sells goods to customers, this is recorded as an expense
Cost of Goods Sold
Report the hughes results in a separate category
Discontinued Operations
The amount of net income associated with each share of stock
Earnings Per Share (EPS)
A system of earnings-based compensation
Economic Value Added
Expanded Accounting Equation
Assets=Liabilities+Paid-in Capital + (Revenues-Expenses-Dividends)
The value of resources used in generating the reported revenue
Expenses
Gains and losses that result from transactions that are both unusual in nature and infrequent in occurrence
Extraordinary Items
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
Financial Capital Maintenance
The amount a company makes money on activities that are peripheral to its primary operations
Gain
The difference between the selling price of the product and the cost of the product
Gross Profit
The segments of a company’s business that it considers to be normal, and expects to operate in for the foreseeable future
Income from Continuing Operations
The amount a company loses money of activities that are peripheral to its primary operations
Loss
The concept typically used in practice to determine when an expense should be recognized
Matching
Includes multiple sub-totals within the income statement
Multiple-step Income Statement
The accountant’s attempt to summarize in one number the overall economic performance of a company for a given period
Net Income
The performance of the fundamental business operations conducted by a company
Operating Income
Income is earned only when one experiences an increase in actual physical resources
Physical Capital Maintenance
The fact that companies have exercised considerable discretion in determining the amount and timing of a restructuring charge.
Restructuring Charges
The value of the goods and services provided by a company in its business operations
Revenue
A cornerstone of accrual accounting together with matching principle. They both determine the accounting period, in which revenues and expenses are recognized
Revenue Recognition
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
Single-Step Income Statement
