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10 Cards in this Set
- Front
- Back
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Transaction Approach
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focus on income-related activities in period
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Single step i/s
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Just revs-exps=ni
-report taxes separately as last item before NI to show relation to income before taxes -no distinction between op and nonop -primary advantage: simple presentation, no implementation of priorities amongst rev/exp items |
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Multi-Step IS
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-separate op and nonop, other
-classify exps by function (cogs, selling, admin, etc) |
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intermediate components of multistep
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1. operating section: cogs, revs, sales
2. nonops: secondary, sometimes unusual (other revs, exps, gains, losses) 3, Income Tac: state and fed 4. Discontinued operations: material g/l from disposal 5. Extraordinary items: unusual AND infrequent 6. Earnings per share *breaks out GROSS PROFIT*, net sales, rev, income from ops; gp useful for evals/predictions |
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Irregular items
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1.Discontinued Ops: report 2 amounts-- income/loss from operations (net of tax) AND from disposal, also net
2. Extraordinary items: nonrecurring, material, unusual AND infrequent 3. Unusual Gains/Losses: unusual OR infrequent, not both; report right befor income from operations before taxes and extraordinary items 4. Changes in acct principles (adjust RE): RETROSPECTIVE ADJ-- recast prior year statements on basis consistent with newly adopted principle, record cumm. effect on changes for prior periods as adjustments to beg. RE of earliest year presented, nothing really changes in current year 5. Changes in estimate: no retrospective changes, only prospective: change only the periods affected (just the one period of the change or that and future periods if affected) 6. Correction of errors: change beginning RE; PRIOR PERIOD ADJUSTMENT (debit RE if sales revenue was overstated; NI overstated-- credit RE to fix) |
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Irreg Items SUmmary
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modified all-inclusive: except for changes in accounting principles or error corrections, which are credited/charged to begining RE, cos close all other irreg g/l or nonrecurring to incomr summary on IS
-classify disc ops in IS separately after income from continuing ops |
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Intraperiod Tax Allocation
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Used on the following:
income from cont ops discont ops extraordinary items *to show that income tax expense is a real cost* "let the tax follow the income" Income before estraordinary iten $$$$$ Extraordinary Item $$$ Less: Applicable Income Tax Reduc. $$$ $$$$$ |
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EPS
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NI-Preferred Dividends/Weighted Average of Common Shares Outstanding
*must be disclosed on face of BS, and do it for income from continuing ops, anything discontinued, unusual charges, extraordinaries (see p. 179) |
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RE
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NI increases RE; Net loss, cash/stock divs decrease it
Retained earnings, January 1 Add: Net INcome Less: Cash Dividends Stock Dividends Retained Earnings, December 31 |
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Other Comprehensive Income
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-includes g/l that bypass NI but affect SE:
unrealized g/l on available for sale securities foreign exchange g/l -FASB requires that the components of other comp inc be recorded in 1 of 3 ways 1. a second income statement 2. a combined income sttement of comprehensice income 3. part of the statement of stockholders equity reported below NI |
