FAR 1 Flashcards
(27 cards)
What is a multi-step income statement?
A multi-step income statement is a financial statement that separates operating revenues and expenses from non-operating revenues, expenses, gains, and losses.
True or False: The multi-step income statement provides more detailed information than a single-step income statement.
True
What are the main sections of a multi-step income statement?
The main sections are Sales, Cost of Goods Sold, Gross Profit, Operating Expenses, Operating Income, Other Revenues and Expenses, and Net Income.
Fill in the blank: The formula for Gross Profit is ________ minus Cost of Goods Sold.
Sales Revenue
What is the purpose of separating operating and non-operating income?
To provide clearer insights into the core operating performance of the business.
Which section comes first in a multi-step income statement?
Sales Revenue section
True or False: Operating expenses include costs such as selling, general, and administrative expenses.
True
What is Operating Income?
Operating Income is the income generated from normal business operations, calculated as Gross Profit minus Operating Expenses.
What does the term ‘Non-Operating Income’ refer to?
Income generated from activities not related to the core business operations, such as interest and investment income.
Multiple Choice: Which of the following is included in the Other Revenues and Expenses section? A) Cost of Goods Sold B) Interest Expense C) Sales Revenue
B) Interest Expense
What is the final line of a multi-step income statement called?
Net Income
True or False: A multi-step income statement can help identify trends in a company’s profitability.
True
What is the difference between Gross Profit and Operating Income?
Gross Profit is Sales Revenue minus Cost of Goods Sold, while Operating Income is Gross Profit minus Operating Expenses.
Fill in the blank: A multi-step income statement typically breaks down revenues and expenses into ________ and ________ categories.
operating, non-operating
What is the significance of the Cost of Goods Sold section?
It measures the direct costs attributable to the production of goods sold by the company.
Multiple Choice: Which of these is NOT a component of Operating Expenses? A) Rent Expense B) Depreciation Expense C) Income Tax Expense
C) Income Tax Expense
True or False: Net Income is the same as Operating Income.
False
What do you call the income earned from sales before any expenses are deducted?
Sales Revenue
Fill in the blank: The formula for Net Income is ________ minus total expenses.
Total Revenues
What type of income statement is commonly used by larger companies?
Multi-step income statement
True or False: The multi-step income statement format is required by GAAP.
False
What is one advantage of using a multi-step income statement?
It provides detailed financial information that can help stakeholders make informed decisions.
What does ‘Operating Expenses’ include?
Costs associated with running the business, such as salaries, rent, and utilities.
Multiple Choice: Which of the following is a component of Gross Profit? A) Sales Revenue B) Operating Expenses C) Interest Income
A) Sales Revenue
