Classification of Income Statement Flashcards

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Questions and Answers

What is the definition of 'Other Revenues and Gains'?

Interest Expense

Selling Expense

Sales Revenue

Rental Revenue (correct)

What is the definition of 'Other Expenses and Losses'?

Gain on Sale of Equipment

Rental Revenue

Interest Expense (correct)

Sales Revenue

What is the definition of 'Beginning Retained Earnings'?

On Statement of Retained Earnings

What is the definition of 'End Retained Earnings'?

On Statement of Retained Earnings Signup and view all the answers

What is the definition of 'Other Revenues and Gains' that includes Dividend Revenue?

Dividend Revenue Signup and view all the answers

What are 'Sales Returns' classified under?

Sales Revenue Signup and view all the answers

What are 'Sales Discounts' classified under?

Sales Revenue Signup and view all the answers

What is the definition of 'Selling Expense'?

Operating expenses - Selling Signup and view all the answers

What does 'Income Tax on Operating Activities' refer to?

Income Tax Signup and view all the answers

What is the definition of 'Bad Debt Expense'?

Operating Expenses - Selling Signup and view all the answers

What does 'Depreciation of Sales Equipment' mean?

Operating expenses - Selling Signup and view all the answers

What is a component of 'Cost of Goods Sold'?

Depreciation of Manufacturing Equipment Signup and view all the answers

What does 'Cash Dividends Declared' refer to?

On Statement of Retained Earnings Signup and view all the answers

What do 'Loss on Sale of Discontinued Operations' and its associated tax indicate?

Extraordinary Items Signup and view all the answers

The ______ associated with loss from operation of discontinued segment.

Tax Signup and view all the answers

What does 'Write Down of Inventory Due to Obsolescence' illustrate?

Cost of Goods Sold Signup and view all the answers

What does 'Advertising' fall under in operating expenses?

operating expenses - Selling Signup and view all the answers

What does 'Gain on Sale of Equipment' fall under?

Other Revenues and Gains Signup and view all the answers

What is 'write-off of goodwill' classified as?

other expenses and losses Signup and view all the answers

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.