Vol. 3 Components and Format of the Income Statement

Question 1

(components and format of the income statement)
ASC (abbrev.)

Answer 1

Accounting Standards Codification

Question 2

(components and format of the income statement)
ASC Section 2210-10-45 [Title]

Answer 2

Comprehensive Income-Overall-Other Presentation Matters

Question 3

(components and format of the income statement)
ASC 220-10-45 [description]

Answer 3

Discusses acceptable formats in which to present income, other comprehensive income, and comprehensive income

Question 4

(components and format of the income statement)
In a comparative analysis, an analyst may need to reference information disclosed elsewhere in companies’ annual reports—typically ___________ and __________

Answer 4

In a comparative analysis, an analyst may need to reference information disclosed elsewhere in companies’ annual reports—typically [the notes to the financial statements] and [the Management Discussion and Analysis (MD&A)]

Question 5

(components and format of the income statement)
In a(n) ___________, an analyst may need to reference information disclosed elsewhere in companies’ annual reports—typically the notes to the financial statements and the management discussion and analysis (MD&A)

Answer 5

comparative analysis

Question 6

(components and format of the income statement)
Revenue generally refers to _________

Answer 6

the amount charged for the delivery of goods or services in the ordinary activities of a business.

Question 7

(components and format of the income statement)
Revenue is _______

Answer 7

the amount reported after adjustments (e.g., for cash or volume discounts, or for other reductions)

Question 8

(components and format of the income statement)
Expenses reflect …

Answer 8

Reflect outflows, depletions of assets, and incurrences of liabilities in the course of the activities of a business.

Question 9

(components and format of the income statement)
________ also includes gains and losses, which are increases and decreases in economic benefits, respectively, which may or may not arise in the ordinary activities of the business

Answer 9

net income

Question 10

(components and format of the income statement)
Certain items, such as ______, _______, and ________ are required to be presented separately on the face of the income statement.

Answer 10

revenue, finance costs, and tax expense

Question 11

(components and format of the income statement)
Certain items, such as revenue, finance costs, and tax expense required to be presented separately on ___________

Answer 11

the face of the income statement

Question 12

(components and format of the income statement)
expenses may be grouped together either by these two things.

Answer 12

grouping by nature or grouping by function
(expenses)

Question 13

(components and format of the income statement)
grouping by nature [example]

Answer 13

grouping together expenses such as depreciation on manufacturing equipment and depreciation on administrative facilities into a single line item called “depreciation”.

Question 14

(components and format of the income statement)
grouping by function [example]

Answer 14

grouping together expenses into a category such as cost of goods sold, which may include labor and material costs, depreciation, some salaries, and other direct sales related as “cost of sales”

Question 15

(components and format of the income statement)
One subtotal often shown in an income statement is ________ sometimes called ___________.

Answer 15

gross profit or gross margin

Question 16

(components and format of the income statement)
When an income statement shows a gross profit subtotal, it is said to use a ___________

Answer 16

multi-step format rather than a single-step format

Question 17

(components and format of the income statement)
operating profit / operating income is located on which financial statement?

Answer 17

income statement

Question 18

(components and format of the income statement)
operating profit [calculation]

Answer 18

results from deducting operating expenses such as selling, general, administrative, and research and development expenses from gross profit.

Question 19

(components and format of the income statement)
operating profit [describe]

Answer 19

reflects a company’s profits on its business activities before deducting taxes, and for non-financial companies, before deducting interest expenses.

Question 20

(components and format of the income statement)
operating profit [synonyms]

Answer 20

earnings before interest and taxes [EBIT]