Topic_4_Income_Statement_Flashcards
(10 cards)
What does the income statement report?
A company’s revenues and expenses over a specific period.
How is net income calculated?
Net Income = Revenues – Expenses
When is revenue recognized under accrual accounting?
When earned, regardless of when cash is received.
What is gross profit?
Gross Profit = Revenue – Cost of Goods Sold
What are the two subtotals included in a multi-step income statement? (Pre-assessment)
Gross profit and operating income.
When should advertising costs be expensed? (Pre-assessment)
In the period the ad runs.
If services were provided in 2014 but paid in 2015, when is revenue recognized? (Pre-assessment)
In 2014, when services were provided.
What are non-operating items on the income statement?
Items like interest, taxes, and gains/losses not part of core operations.
Why use a multi-step income statement?
To provide more detail on gross profit and operating performance.
What is the purpose of accrual accounting?
To match revenues and expenses in the correct period for accurate financial performance.
