Week 2 - The Income Statement Flashcards

Questions and Answers

Another name for the income statement is?

Statement of earnings

The financial statement that presents a summary of the revenues and expenses of a business for a specific period of time, such as a month or a year, is called a(n)?

Income Statement

Resource increases from the sale of goods or services are called?

Revenues

Revenues cause?

An increase in net assets Signup and view all the answers

Costs that are incurred during the normal operations of a business to generate revenues are called?

Expenses Signup and view all the answers

Which of the following is an overall measure of the performance of a business entity's activities?

Net income (or net loss) Signup and view all the answers

Which of the following is a revenue generating activity?

Selling a product Signup and view all the answers

The difference between sales and cost of goods sold is called?

Gross profit Signup and view all the answers

The beginning balance of retained earnings will be greater than the ending balance if?

The company has a net income less than dividends paid Signup and view all the answers

Retained earnings are?

Earnings of a company that have been retained in the company Signup and view all the answers

Study Notes

Income Statement Overview

Also known as the Statement of Earnings, summarizing financial performance.
Presents a summary of revenues and expenses for a specific time period (e.g., monthly, yearly).

Key Financial Concepts

Revenues are resource increases resulting from selling goods or services.
An increase in revenues leads to a growth in net assets of a business.
Expenses are costs required for normal operations to generate revenues.

Performance Measurement

Net income (or net loss) serves as an overall measure of a business's performance.
Selling a product qualifies as a primary revenue-generating activity.

Profit Analysis

Gross profit is defined as the difference between total sales and the cost of goods sold.
The calculation of gross profit helps assess a company's profitability before operating expenses.

Retained Earnings Dynamics

Retained earnings represent earnings kept within the company for reinvestment after distributing dividends.
If a company's net income is lower than dividends paid, the ending balance of retained earnings will be less than the beginning balance.

Description

Test your knowledge with these flashcards on the income statement, a vital component of financial reporting. Each card covers key terms and definitions that explain the structure and function of the income statement. Perfect for accounting students or anyone looking to strengthen their financial literacy.