Kieso_Inter_13e_Ch04

Kieso_Inter_13e_Ch04 - Chapter 4-1 C H A P T E R C H A P T E R 4 4 INCOME STATEMENT AND RELATED INCOME STATEMENT AND RELATED INFORMATION

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Unformatted text preview: Chapter 4-1 C H A P T E R C H A P T E R 4 4 INCOME STATEMENT AND RELATED INCOME STATEMENT AND RELATED INFORMATION INFORMATION Intermediate Accounting 13th Edition Kieso, Weygandt, and Warfield Chapter 4-2 Evaluate past performance. Income Statement Income Statement Help assess the risk or uncertainty of achieving future cash flows. Predicting future performance. Usefulness Chapter 4-3 Companies omit items that cannot be measured reliably. Income Statement Income Statement Limitations Income measurement involves judgment. Income is affected by the accounting methods employed. Chapter 4-4 Companies have incentives to manage income to meet or beat Wall Street expectations, so that market price of stock increases and value of stock options increase. Income Statement Income Statement Quality of earnings is reduced if earnings management results in information that is less useful for predicting future earnings and cash flows. Quality of Earnings Chapter 4-5 Format of the Income Statement Format of the Income Statement Revenues – Inflows or other enhancements of assets or settlements of its – Inflows or other enhancements of assets or settlements of its liabilities that constitute the entity’s ongoing major or central operations. liabilities that constitute the entity’s ongoing major or central operations. Sales Sales Fee revenue Fee revenue Interest revenue Interest revenue Dividend revenue Dividend revenue Rent revenue Rent revenue Examples of Revenue Accounts Elements of the Income Statement Chapter 4-6 Format of the Income Statement Format of the Income Statement Expenses – Outflows or other using-up of assets or incurrences of liabilities – Outflows or other using-up of assets or incurrences of liabilities that constitute the entity’s ongoing major or central operations. that constitute the entity’s ongoing major or central operations. Cost of goods sold Cost of goods sold Depreciation expense Depreciation expense Interest expense Interest expense Rent expense Rent expense Salary expense Salary expense Examples of Expense Accounts Elements of the Income Statement Chapter 4-7 Format of the Income Statement Format of the Income Statement Gains – Increases in equity (net assets) from peripheral or incidental – Increases in equity (net assets) from peripheral or incidental transactions. transactions. Losses - Decreases in equity (net assets) from peripheral or incidental - Decreases in equity (net assets) from peripheral or incidental transactions. transactions. Gains and losses can result from Gains and losses can result from sale of investments or plant assets, sale of investments or plant assets, settlement of liabilities, settlement of liabilities, write-offs of assets....
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This note was uploaded on 03/08/2011 for the course ACCT 3220 taught by Professor Hollie,dana during the Summer '08 term at Colorado.

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Kieso_Inter_13e_Ch04 - Chapter 4-1 C H A P T E R C H A P T E R 4 4 INCOME STATEMENT AND RELATED INCOME STATEMENT AND RELATED INFORMATION

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