ch04 - 4 4-1 Income Statement and Related Information 4 Income Statement and Related Information LEARNING OBJECTIVES LEARNING OBJECTIVES After studying

ch04 - 4 4-1 Income Statement and Related Information 4...

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4-1 Income Statement and Related Information 4
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4-2 Understand the uses and limitations of an income statement. Describe the content and format of the income statement. Prepare an income statement. Explain how to report various income items. Identify where to report earnings per share information. Prepare a retained earnings statement. Explain how to report other comprehensive income. After studying this chapter, you should be able to: Income Statement and Related Information 4 LEARNING OBJECTIVES LEARNING OBJECTIVES
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4-3 Evaluate past performance. LO 1 Understand the uses and limitations of an income statement. Help assess the risk or uncertainty of achieving future cash flows. Predicting future performance. Usefulness Income Statement Income Statement
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4-4 Limitations LO 1 Understand the uses and limitations of an income statement. Companies omit items that cannot be measured reliably. Income is affected by the accounting methods employed. Income measurement involves judgment. Income Statement Income Statement
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4-5 Elements of the Income Statement Elements of the Income Statement LO 2 Describe the content and format of the income statement. Revenues – Inflows or other enhancements of assets or settlements of its liabilities that constitute the entity’s ongoing major or central operations. Sales Fee Interest Examples of Revenue Accounts Dividend Rent
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4-6 Elements of the Income Statement Elements of the Income Statement Expenses – Outflows or other using-up of assets or incurrences of liabilities that constitute the entity’s ongoing major or central operations. Examples of Expense Accounts Cost of goods sold Depreciation Interest Rent Salaries and wages Taxes LO 2 Describe the content and format of the income statement.
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4-7 Elements of the Income Statement Elements of the Income Statement Gains and losses can result from sale of investments or plant assets, settlement of liabilities, write-offs of assets. Gains – Increases in equity (net assets) from peripheral or incidental transactions. Losses - Decreases in equity (net assets) from peripheral or incidental transactions. LO 2 Describe the content and format of the income statement.
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4-8 Elements of the Income Statement Elements of the Income Statement Revenue VS. Gains – When inflows or enhancements of assets result from typical business activities (generally the activities the entity is in business to perform), revenues result. Nontypical business activities resulting in inflows of assets will normally generate transactions classified as gains . Expenses VS. Losses – Outflows or the using up of assets resulting from typical business activities will generate expenses.
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