Income Statement Flashcards
Define “expenses.”
Decreases in net assets or incurrence of liabilities through the provision of goods or services
Define “gains.”
Increases in equity or net assets from peripheral or incidental transactions
How are unusual and/or infrequent items reported?
They must be separately reported if material as a component of income from continuing operations.
What is operating margin?
The excess of operating revenues over operating expenses
What does the single‐step income statement present?
Total revenues and gains less total expenses and losses
What does the multiple‐step income statement present?
Includes multiple subtotals of revenues, expenses, gains, and losses Sales ‐ Cost of Goods Sold = Gross profit; Gross profit ‐ Operating expenses = Income from operations; Income from operations + or − Other income / expenses= Income before taxes Income before taxes − Taxes = Net Income
Define “losses.”
Decreases in equity or net assets from peripheral or incidental transactions
What is economic income?
The change in the net worth of a business enterprise during an accounting period
What represent increases in net assets or settlements of liabilities by providing goods and services?
Revenues
What items are not shown on the income statement?
Prior‐period adjustments
Foreign currency translation adjustments
Unrealized gains and losses on available for sale (AFS) securities
Unrecognized pension items
Cumulative effect of changes in accounting principle
Unrealized gains and losses on cash flow hedges
What is the order of income statement presentation?
Income from continuing operations
Income from discontinued operations (net of tax)
Net income
Does accounting income take a transactions‐based determination of income or a change in net worth?
Accounting income is transaction based.
