The Income Statement Flashcards
(27 cards)
Accrual Accounting
The process that accountants use in adjusting raw transaction data into refined measures of a firm’s economic performance
Revenue
Anything of value generated through business operations
Sales Revenue
selling price of goods sold during the period
Service Revenue
Fees charged for services
Interest Revenue
Money received from interest
Expenses
value of resources used in generating revenue
Cost of Goods Sold
Expense from buying inventory
Gross Profit
Sales - Cost of Goods Sold
Gross Profit Percentage
Gross Profit/Sales = number of pennies of gross profit made from each dollar of sales
Operating, Selling, General, and Administrative Expense
advertising, wages, rent, etc.
Research and Development Expense
Not an asset
Wages and Salaries Expense
cost of all employee benefits
Bad Debt Expense
Unpaid credit accounts
Depreciation
Wear and tear on long-lived assets
Interest Expense
Reported whether or not it has been paid. Not an operating expense.
Operating Expense
Expenses relating to the unique nature of a particular business. Everything except interest/income tax expense. EBIT - Earnings before interest and taxes
Income Tax Expense
The sum of all income tax consequences of all transactions during a year
Gain or Loss
When a company makes or loses money on peripheral activities. Selling a long-term asset for more or less than recorded cost.
Below the Line Items
Excluded from continuing operations because they are unlikely to recur in the future.
Income from Discontinued Operations
Below the Line Item. When a company elects to dispose of a major business segment.
Extraordinary or Nonrecurring Items
Gains and losses that result from transactions that are unusual, infrequent, and not expected to occur again
Earnings per Share
EPS, net income/number of stocks
Operating Income
Measures the performance of the fundamental business operations conducted by a company. Gross profit - operating expenses
Income from Continuing Operations
Reflects the aspects of a company’s performance that are expected to continue in the future. Interest expense + income expense - Operating income
