Chapter 4 NEW - The Income Statement and The Statement of...

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Accounting 123/The Income Statement 1 The Income Statement and The  Statement of Cash Flows Performance reporting Prepared by: Prof. Elizabeth K. Venuti
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Accounting 123/The Income Statement 2 The Income Statement Reports the profitability of an enterprise for a given period of time. Provides investors with information to help predict the amounts, timing, and uncertainty of future cash flows. Limited due to: Inability to reliably measure certain items Alternative accounting methods for similar transactions Use of estimates and judgment
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Accounting 123/The Income Statement 3 Net Income vs. Comprehensive Income Comprehensive income includes traditional net income and changes in equity from non-owner transactions. Comprehensive income is an expanded version of income that includes four types of gains and losses that traditionally have not been included in income statements. Changes in value related to Investments Pensions Derivative instruments Foreign currency translation
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Accounting 123/The Income Statement 4 Reporting Other Comprehensive Income Net Income is reported on the Income Statement Other comprehensive income may be reported as a second separate income statement; a combined income statement; or part of the statement of stockholders’ equity (most common).
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Accounting 123/The Income Statement 5 Income Statement Format Heading: Company Name ‘Income Statement’ Period Covered Elements of Income Statement: Revenues Expenses Gains Losses Not an element of the Income Statement Dividends!
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Accounting 123/The Income Statement 6 Computation of Net Income Presented below are changes in the balances of Zarb Consulting Company during the year, except for retained earnings. Assuming that there were $15,000 of dividends declared and paid, compute net income for the year. Increase (decrease) Increase (decrease) Cash 49,000.00 $ Accounts payable (42,000.00) $ Accounts receivable 65,000.00 Bonds payable 65,000.00 Inventory (20,000.00) Common stock 45,000.00 Investments 16,000.00 Additional paid-in capital 20,000.00
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Accounting 123/The Income Statement 7 Presentation Formats Single-step Income Statement Information presented in two categories: Revenues and Expenses. Expenses deducted from revenues to arrive at net income. Non-operating transactions not reported separately.
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This note was uploaded on 04/10/2008 for the course ACT 123 taught by Professor Venuti during the Fall '07 term at Hofstra University.

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Chapter 4 NEW - The Income Statement and The Statement of...

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