Term
| What is the purpose of the Income Statement? |
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Definition
| The purpose of the income statement or (statement of operations), is to summarize the profit-generating activites that occured during a particular reporting period. |
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Term
| What is the definition of comprehensive income? |
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Definition
| the total change in equity for a reporting period other than from transactions with owners. |
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Term
| What are the two types of events that, if they have a material effect on the income statement, require seperate reporting and disclosure? |
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Definition
| (1) Discontinued Operations and (2) Extraordinary Items |
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Term
| Income tax expense is shown as a separate expense in the... |
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Definition
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Term
| What is meant by intraperiod tax allocation? |
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Definition
| The process of associating income tax expense with each major component of income that causes it. |
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Term
| The term earnings quality refers to... |
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Definition
| the ability of reported earnings (income) to predict a company's future earnings. |
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Term
| What is meant by discontinued operations? |
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Definition
| A discontinued operation results when a company either disposes or classifies as held for sale a component of an entity. |
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Term
| How is the income effect of discontinued operations reported in the income statment when the discontinued component has been sold before the end of the reporting period? |
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Definition
| Operating income or loss (revenues, expenses, gains, and losses) of the component from the beginning of the reporting period to the disposal date. Also, as a gain or loss on disposal. These two elements can be combined or reported separately, net of their tax effects. If combined, the gain or loss on disposal must be disclosed. |
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Term
| What are extraordinary items? |
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Definition
| Extraordinary items are material gains and loss that are both unusual in nature and infrequent in occurrence. |
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Term
| How is a change in accounting priciple reported? |
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Definition
| We report voluntary changes in accounting principles retrospectively. This means revising all previous periods' financial statements as if the new method were used in those periods. |
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Term
| What is the required accounting treatment for the correction of a material error discovered in a year subsequen to the year the error occurs? |
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Definition
| A material error discovered in a subsequent year is considered a prior period adjustment. Prior years' financial statements are restated and the beginning balence in retained earnings is adjusted as needed. |
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Term
| How are cash flows classified in the statement of cash flows? |
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Definition
The statement of cash flows classifies all cash flows into one of three categories:
1. Operating activites.
2. Investing activities.
3. Financing activities. |
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