ch04.ppt - INTERMEDIATE F I F T E E N T H E D I T I O N Intermediate ACCOUNTING Intermediate Accounting Accounting 4-1 Prepared by Prepared by Coby

ch04.ppt - INTERMEDIATE F I F T E E N T H E D I T I O N...

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4-1 Prepared by Coby Harmon University of California, Santa Barbara Intermediate Accounting Intermediate Accounting Prepared by Coby Harmon University of California, Santa Barbara Westmont College INTERMEDIATE ACCOUNTING F I F T E E N T H E D I T I O N Prepared by Coby Harmon University of California Santa Barbara Westmont College ki e so w e ygandt warfi e ld team for success
4-2 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
4-3 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
4-4 Format of the Income Statement Format 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 Elements of the Income Statement Dividend Rent
4-5 Format of the Income Statement Format 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 Elements of the Income Statement Cost of goods sold Depreciation Interest Rent Salaries and wages Taxes LO 2 Describe the content and format of the income statement.
4-6 Format of the Income Statement Format of the Income Statement Gains and losses can result from sale of investments or plant assets, settlement of liabilities, write-offs of assets. Elements of the Income Statement 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.
4-7 Format referred to as multiple-step income statement . Separates operating transactions from nonoperating transactions. Matches costs and expenses with related revenues. Highlights certain components of income that analysts use assessing financial performance. Format of the Income Statement Format of the Income Statement Intermediate Components LO 3 Prepare an income statement.
4-8 Common for companies to present some or all of the following sections and totals within the income statement. 1. Operating section 2. Nonoperating section 3. Income tax 4. Discontinued operations 5.

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