Week 4 - Statement of Comprehensive Income Part I Flashcards
Every business undertaking is unique depending on the nature of its
operations, i.e., the business is engaged in providing services, in retailing or
wholesaling purchased goods, or in manufacturing goods from raw materials.
The nature of operations also defines the type of revenue and expense
accounts the business uses in recording its transactions.
-read-
describes the revenues and gains, expenses and
losses along with the resulting net income or net loss of the business due to
its operating activities for a given period of time.
Statement of income
These are inflows of resources (usually cash or receivables) during the
course of ordinary operating activities. this usually arises from the sale
of services or goods.
Revenues
This is synonymous to the word income. The
account titles used for _____ are modified depending on the type of
business operations. For service businesses, service income, professional fees, ticket sales, etc. may be used. For merchandisers and manufacturers, sales or
sales revenue are account titles frequently used.
Revenues
This will also result to an inflow of resources but these do not arise from the
main activity of the enterprise but from those considered incidental activities
like selling old equipment at a price above its book value. Account title used
for this transaction can be gain from sale of equipment
Gains
These are outflows of resources (usually paid in cash or incurred on
credit) during the course of ordinary operating activities.
Expenses
This happen
when assets are used in the normal course of doing business. Examples of
expenses are:salaries and wages expense, rent expense, utilities expense, etc.
Expenses
Some expense account titles may reveal the nature of operations like cost of
servicesused by service businesses, cost of goods sold used by merchandising
businesses, and cost of goods manufactured and sold which is used by
manufacturing businesses.
-read-
This will also result to an outflow of resources but these do not arise from
the main activity of the enterprise but from those that are considered
incidental activities like selling an investment that the company previously
acquired at a price lower than its book value. The account title that can be
used for this transaction is loss from the sale of investment.
Losses
This is arrived at when the revenues and gains are
greater than the expenses and losses, indicating successful business
operations during the period. If the reverse is true, i.e., expenses and losses
are greater than revenues and gains; the difference is called net loss.
Net profit or net income
Income Statement, or Profit and Loss Statement, is directly linked to balance sheet,
cash flow statement and statement of changes in equity
-read-
The increase or decrease in net assets of an entity arising from the profit or loss
reported in the income statement is incorporated in the balances reported in the
balance sheet at the period end.
The profit and loss recognized in income statement is included in the cash flow
statement under the segment of cash flows from operation after adjustment of noncash transactions. Net profit or loss during the year is also presented in the
statement of changes in equity.
Read
Businesses usually undertake three activities
investing, financing and
operating. Operating activities refer to the undertakings of the business that
generate additional resources for the firm. Operating activities involve using
the firm’s resources to generate goods and services for sale at a profit.
There are three types of business operations:
service, merchandising, and
manufacturing. As a refresher from the first module, let us expound further
on these.
This is involved in selling services. A doctor or a teacher
practicing their professions, a day-care center, or a big accounting firms like
SGV & Co and Ernst & Young are all engaged in service businesses
Service business
