Test Your Knowledge of Income Statements

What is another name for an income statement?

What does an income statement show?

What is the difference between an income statement and a balance sheet?

What is the purpose of an income statement?

What is the difference between a single-step income statement and a multi-step income statement?

What is the purpose of disclosing irregular items separately in the notes of an income statement?

What is the net income informally called?

What organization formulates guidelines for statements of comprehensive income and income statements of business entities?

What is the name of the similar statement produced by charitable organizations?

Income Statement: Key Points

An income statement, also known as a profit and loss statement, shows a company's revenues and expenses during a particular period.
It indicates how revenues are transformed into net income or net profit.
Income statements represent a period of time, in contrast to the balance sheet, which represents a single moment in time.
Charitable organizations produce a similar statement called the statement of activities.
The income statement can be prepared in one of two methods: single-step income statement and multi-step income statement.
Income statements may help investors and creditors determine the past financial performance of the enterprise and predict future performance.
Guidelines for statements of comprehensive income and income statements of business entities are formulated by the International Accounting Standards Board and other organizations.
Operating expenses are analyzed either by nature or by function.
Irregular items, such as changes in accounting policies, are reported separately because they are not expected to recur.
Certain items must be disclosed separately in the notes, including earnings per share.
The net income is informally called the bottom line.
The International Accounting Standards Board issued a revised IAS 1: Presentation of Financial Statements, which is effective for annual periods beginning on or after 1 January 2009.

How well do you understand income statements? Test your knowledge with this quiz! Learn key points about income statements, including how they represent a period of time, the different methods of preparation, and why certain items must be disclosed separately. See if you can identify irregular items and analyze operating expenses by nature or function. Take the quiz to see if you can identify the bottom line and understand the guidelines for statements of comprehensive income and income statements of business entities.