Study your flashcards anywhere!

Download the official Cram app for free >

  • Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off
Reading...
Front

How to study your flashcards.

Right/Left arrow keys: Navigate between flashcards.right arrow keyleft arrow key

Up/Down arrow keys: Flip the card between the front and back.down keyup key

H key: Show hint (3rd side).h key

A key: Read text to speech.a key

image

Play button

image

Play button

image

Progress

1/29

Click to flip

29 Cards in this Set

  • Front
  • Back
define income statement
the report that measures the success of company operations for a given period of time
why do investors and creditors use the income statement?
1.evaluate past performance
2.provide a basis for predicting future performance
3. help assess the risk or uncertainty of achieving future cash flows
what elements are found in the income statement?
revenue,expense,gain,and losses
what are some limitations of the income statement?
1. companies omit items from the i.s that they cannot measure reliably
2. income #'s are affected by the accounting methods employed
3. income measurement involves judgement.
what is earnings management?
the planned timing of revenues, expenses, gains and losses to smooth bumps in earnings
T/F. earnings management can negatively affect the quality of earnings.
true. if it distorts the info in a way that is less useful for predicting future earnings and cash flows
define revenues
inflows or other enhancements of assets of an entity during a period from activities that constitute the entity's ongoing major operations
define expenses
outflows or other using up of assets during a period from carrying out activities that constitute the entity's ongoing major operations
define gains
increase in equity (net assets) from peripherial or incidental transactions of an entity
define losses
decrease in equity (net assets) from peripherial or incidental transactions of an entity
name some examples of revenues
sales,interest,rents
what are some examples of expenses
cost of goods sold,interest
describe the format of a single step income statement
it consists of only two groups: revenues and expenses. expenses are deducted from revenues to arrive at net income or loss
what are the 6 sections of a multistep income statement (in order)
1. operating section
2. non operating section
3. income tax
4. discontinued operations
5. extraordinary items
6. earnings per share
what are the four sections found in the operating section of a multistep i.s.
1. sales/revenue
2. cost of goods sold
3. selling expense
4. administrative or general expense
what are the two sections found in the non operating section of a multistep i.s
1. other revenue/gains
2. other expenses/losses
what are six categories of irregular items?
1. discontinued operations
2. extraordinary items
3. unusual gains and losses
4. changes in accounting principle
5. changes in estimates
6. corrections of errors
when is something classified as a discontinued operation?
a company eliminates the results of perations and cash flows of a component from its ongoing operations and there is no significant continuing involvement in that component after the disposal transaction.
how is discontinued operations shown on the i.s
shown net of tax before extraordinary items and after continuing operations
what are extraordinary items
events and transactions that are unusual in nature and infrequent in occurrence
give two examples of an extraordinary item
1. prohibition of a newly enacted law
2. earthquake in nyc
how are extraordinary items shown in the i.s?
net of taxes in a seperate section just before net income
define unusual gains and losses
unusual or infrequent but not both
how are unusual gains or losses shown on the income statement?
in seperate section above income before extraordinary items. not shown net of tax
what is changes of principle?
change from one generally accepted principle to another
what is intraperiod tax allocation?
companies report irregular items (except for unusual gains and losses) on the income statement net of tax.
what items on the income statement have intraperiod tax allocation?
income from continuing operations, discontinued operations, and extraordinary items.
what is earnings per share?
net income - preferred dividends divided by weighted average of common shares outstanding.
what is comprehensive income?
all changes in equity during a period except those resulting from investments by owners nad distributions to owners.