Topic 4 The Income Statment Flashcards
Accrual Accounting
process that accountants use in adjusting raw transaction data into refined measures of firm’s economic performance
Physical Capital Maintenance
Income is earned only when one experiences an increase in actual physical resources
Financial Capital Maintenance
approach that accountants typically use in computing a company’s income is the first option described above in which inflation is ignored and a company is said to have income when its financial resources increase
Gross Product
difference between the selling price of the product and the cost of the product
Operating Income
measures the performance of the fundamental business operations conducted by a company and is computed as gross profit-operating expenses
Income from continuing operations
the segments of a company’s business that it considers to be normal, and expects to operate in for the foreseeable future
=Operating Income-interest expense-income tax expense-other misc items
Net Income
the accountant’s attempt to summarize in one number the overall economic performance of a company for a given period.
Comprehensive Income
number used to reflect an overall measure of the change in a company’s wealth during the period.
Comprehensive Income Items
changes from translating financial statements of non-US subsidiaries into US dollars caused by changes in foreign currency exchange rates
- Changes in the value of investment securities that are not held for active trading periods.
- Changes in the value of certain derivative instruments
Sales Revenue
most common type of revenue
reflects aggregate selling price of goods sold during a period
Service Revenue
service fees; primary source of income for law firms, plumbers, investments banks, CPAs, and all other businesses that provide services instead of goods.
Fees are earned in exchange for services
Interest Revenue
for banks interest revenue is the primary source of revenue
Expenses
the value of resources used in generating the reported revenue
Cost of Goods Sold
when a business sells goods to customers, the cost of the goods sold is recorded as an expense
Selling, General, and Administrative Expense
overall label for a variety of operating expenses.
