Questions and Answers
What is the definition of 'Other Revenues and Gains'?
What is the definition of 'Other Expenses and Losses'?
What is the definition of 'Beginning Retained Earnings'?
On Statement of Retained Earnings
What is the definition of 'End Retained Earnings'?
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What is the definition of 'Other Revenues and Gains' that includes Dividend Revenue?
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What are 'Sales Returns' classified under?
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What are 'Sales Discounts' classified under?
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What is the definition of 'Selling Expense'?
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What does 'Income Tax on Operating Activities' refer to?
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What is the definition of 'Bad Debt Expense'?
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What does 'Depreciation of Sales Equipment' mean?
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What is a component of 'Cost of Goods Sold'?
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What does 'Cash Dividends Declared' refer to?
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What do 'Loss on Sale of Discontinued Operations' and its associated tax indicate?
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The ______ associated with loss from operation of discontinued segment.
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What does 'Write Down of Inventory Due to Obsolescence' illustrate?
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What does 'Advertising' fall under in operating expenses?
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What does 'Gain on Sale of Equipment' fall under?
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What is 'write-off of goodwill' classified as?
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Study Notes
Income Statement Classifications
- Other Revenues and Gains: Includes rental and dividend revenue, along with gains from asset sales.
- Other Expenses and Losses: Comprises interest expense, bond interest expense, and write-offs like goodwill.
- Sales Revenue: Encompasses total sales, sales returns, and sales discounts affecting current assets (CA).
Statement of Retained Earnings
- Beginning Retained Earnings: The starting figure of retained earnings for a financial period.
- End Retained Earnings: The final retained earnings amount after including net income and dividends.
- Cash Dividends Declared: Represents dividends declared during the period, impacting retained earnings.
Operating Expenses
- Selling Expenses: Include selling expenses, bad debt expense, advertising costs, and depreciation of sales equipment.
- Administrative Expenses: Recognize losses from lawsuits or other administrative costs.
- Depreciation: Covers depreciation of both sales and manufacturing equipment, including additional expenses from shifts in estimates.
Extraordinary Items
- Uninsured Loss: Accounts for losses related to extraordinary events, like earthquake damage to facilities, including associated tax effects.
Discontinued Operations
- Loss on Sale: Represents losses incurred from aborting discrete operations and related tax implications.
- Operational Loss: Includes operational losses during the transition period of discontinued segments.
Cost of Goods Sold & Inventory
- Depreciation Impact: Reflects the depreciation impact on manufacturing equipment and potential inventory write-downs due to obsolescence.
Changes in Accounting Estimates
- Bad Debt Percentage: Changes in estimates for bad debts can affect overall expenses and sales figures, impacting financial statements significantly.
- LIFO to FIFO Switch: The cumulative effect of changing inventory accounting methods, such as from Last In, First Out (LIFO) to First In, First Out (FIFO), must be noted in retained earnings.
Overall Summary
- Income statements classify financial activities into revenues, expenses, extraordinary items, and discontinued operations, shaping the income and retained earnings presented each period. Each category influences overall financial health and decision-making critically.
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Description
Test your knowledge on key terms related to the classification of income statements with these flashcards. Each card presents a term and its corresponding definition, covering various aspects of revenues, expenses, and retained earnings. Perfect for accounting students looking to reinforce their understanding of financial statements.
