Classification of Income Statement Flashcards

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Questions and Answers

What does 'Other Revenues and Gains' refer to?

Bad Debt Expense

Sales Discounts

Rental Revenue (correct)

Interest Expense

What does 'Other Expenses and Losses' refer to?

Gain on Sale of Equipment

Sales Discounts

Interest Expense (correct)

Sales Returns

What is the term for the amount at the start of the reporting period on the Statement of Retained Earnings?

Beginning Retained Earnings

What is the term for the amount at the end of the reporting period on the Statement of Retained Earnings?

End Retained Earnings Signup and view all the answers

What does 'Other Revenues and Gains' include aside from Rental Revenue?

Dividend Revenue Signup and view all the answers

Sales Returns fall under Sales Revenue?

True Signup and view all the answers

What is referred to as 'Sales' in the context of Sales Revenue?

Sales Signup and view all the answers

What is the term for tax related to operating activities?

Income Tax Signup and view all the answers

What does 'Bad Debt Expense' relate to?

Selling Expenses Signup and view all the answers

What represents a change in the bad debt percentage from 2% to 3%?

Change in Bad Debt Percentage Signup and view all the answers

What is 'Depreciation of Sales Equipment' categorized under?

Operating Expenses - Selling Signup and view all the answers

What expense arises from the depreciation of manufacturing equipment?

Depreciation of Manufacturing Equipment Signup and view all the answers

What is included under Cash Dividends on the Statement of Retained Earnings?

Cash Dividends Declared Signup and view all the answers

What type of loss is categorized under Discontinued Operations?

Loss on Sale of Discontinued Operations Signup and view all the answers

What is associated with the loss on earthquake damage to a plant?

Extraordinary Items Signup and view all the answers

The write down of inventory due to obsolescence is categorized under ______.

Cost of Goods Sold or Other Expenses and Losses Signup and view all the answers

What represents a loss from a lawsuit?

Operating Expenses - Administrative Signup and view all the answers

What does 'Sales Commissions' relate to?

Operating Expenses - Selling Signup and view all the answers

What is defined as the cumulative effect of switching from LIFO to FIFO inventory method?

Cumulative Effect of a Switch from LIFO to FIFO Signup and view all the answers

Study Notes

Classification of Income Statement Components

Other Revenues and Gains: Includes revenue from sources like rental income and dividend revenue.
Other Expenses and Losses: Pertains to costs not directly related to primary operations, such as interest expense.
Retained Earnings: Reflects the beginning and end balances indicating undistributed profits over time.

Sales Revenue Details

Sales Revenue: Represents total revenue generated from sales, adjusted by sales returns and sales discounts.
Sales Returns (CA): Deductions from sales revenue due to returned goods.
Sales Discounts (CA): Reductions in sales revenue granted to customers for early payment.

Operating Expenses

Selling Expenses: Comprises direct costs associated with selling activities, including selling expense, bad debt expense, and advertising costs.
Change in Bad Debt Percentage: Adjusting the bad debt estimate from 2% to 3% impacts operating expenses.
Depreciation: Reflects the allocation of costs over the useful life of sales equipment and manufacturing equipment.

Extraordinary Items

Uninsured Loss: Indicates losses unrelated to normal business operations, such as damage from an earthquake.
Tax Impact: Taxes associated with extraordinary losses, like earthquake damage, affect overall financial results.

Discontinued Operations

Loss on Sale: Reflects losses incurred from selling a discontinued segment of the business.
Operational Loss: Involves losses generated during operations of the discontinued segment before the sale.
Tax Considerations: Taxes linked to gains or losses from discontinued operations impact retained earnings.

Inventory and Legal Matters

Write Down of Inventory: Reductions in inventory value due to obsolescence classified under cost of goods sold or losses.
Loss from a Lawsuit: Recorded under operating expenses, indicating financial implications from legal actions.

Summary of Changes Affecting Earnings

Cash Dividends Declared: Represent distributions to shareholders impacting retained earnings.
Cumulative Effect of Accounting Changes: Switching inventory accounting methods affects overall profit calculations and retained earnings.

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Description

Test your knowledge on the classification of various items in the income statement with these flashcards. Each flashcard presents a term and its corresponding definition, enhancing your understanding of financial statements.