Lesson 14 Flashcards
What is a statement of comprehensive income
A statement of comprehensive income is a financial statement that summarizes a company’s net income and other comprehensive income (OCI) over a specific accounting period
What is a statement of comprehensive income used for
It is used by shareholders to gain a sense of financial health within the business
What are the advantages of a statement of comprehensive income
Helps the business make decisions about matters regarding revenue spending and profit maximization.
May be used for tax purposes.
Helps investors understand the profitability of a business as well as the stability
What are the disadvantages of a statement of comprehensive income
Based on predictions and not actual results.
Overall may be an unreliable prediction.
Only displays the profitability for a set period time.
What are pre payments
Pre payments is the act of paying for goods, services or debts before they are actually due.
What are pre payments shown as on a statement of comprehensive income
Firstly, when they are paid for they are initially recorded as assets.
However when the prepaid asset is used up, the asset account is reduced and it is recorded as an expense.
What are the advantages of pre paid assets/expenses
Some suppliers offer discounts for buying in advance.
Prepaying represents trust and commitments to vendors, which would lead to better relations.
Pre paid assets/expenses may be able to be deducted on income taxes
What are the disadvantages of pre paid assets/expenses
If the business buys the product/service and does no use it, they effectively lose their whole investment.
It may be difficult to track and utilize pre paid assets at the right time.
Pre paid assets/services can gradually reduce the companies shot term liquidity.
When are prepayments usually conducted
When a business is trying to avoid forms of tax and or improve organization and planning
What are accrued expenses
These are liabilities that are recorded when a business receives goods or services and has not paid for them yet.
What is accrued revenue
This is revenue that has been recognized but has not been paid.
What are the advantages of accruals
