Nature of the Income Statement

Question 1

How are income statement elements reports

Answer 1

In temp/nominal accounts closed at period end to perm/real accounts.

Question 2

What equity account is net income or loss closed to at the end of the period?

Answer 2

Retained earnings

Question 3

What amounts not included in continuing operations are reported in discontinued ops which is a seperate section.

Answer 3

Disposal (getting rid of a component), asset like land or equip held for sale

Question 4

Why is Intraperiod (in between periods) tax allocation required for discontinued ops.

Answer 4

There is a tax expense (subtraction) or tax benefit (addition) for the continuing op, discontinued op, other comprehensive income and other items of other components of equity.

Question 5

What is OCI

Answer 5

All items of comprehensive income not included in net income.

Question 6

List OCI items

Answer 6

unrealized holding gains/losses on available for sale debt security, derivatives, foreign currency translation adj, changes in fair value

Question 7

Cash basis of accounting

Answer 7

revenue is recognized when cash is received. expense is recognized when cash is paid. doesn’t matter when goods are delivered or received or when services or rendered.

Question 8

Modified cash basis

Answer 8

uses cash basis and is modified to the accrual for activities having support. ex inventory, accruing income taxes, capitalizing and depreciating fixed assets

Question 9

What is the balance sheet equation?

Answer 9

A=L+E

Question 10

What are ways to use the balance sheet equation to calculate transactions

Answer 10

A-E= L or A-L=E

Question 11

What amounts should be excluded when calculating total equity?

Answer 11

Treasury stock and net unrealized holding loss on AFS securities because these accounts are a debited.