ACCT 3110 - Chapter 4 Study Guide
.pdf
School
Clemson University**We aren't endorsed by this school
Course
ACCT 3110
Subject
Accounting
Date
Dec 17, 2024
Pages
2
Uploaded by CountEnergyGorilla36
ACCT 3110 - Chapter 4: Study GuideThe Income Statement and Related Information1. Purpose of the Income Statement●Reports a company’sfinancial performanceover a period.●Showsrevenues, expenses, gains, losses, andnet income.2. Components of the Income Statement1.Operating Section:○Revenues: Sales or service revenue.○Expenses: COGS, Salaries, Rent, etc.2.Non-Operating Section:○Other Revenues/Gains: Interest income, sale of assets.○Other Expenses/Losses: Interest expense, losses from sales.3.Income Tax: Shows income taxes related to continuing operations.4.Discontinued Operations:○Operations that aredisposed of or held for sale.○Reportednet of tax.5.Noncontrolling Interest: Portion of income from subsidiaries not owned fully.6.Earnings Per Share (EPS):○Formula:(Net Income - Preferred Dividends) / Weighted Average SharesOutstanding3. Irregular Items●Discontinued Operations:○Report gains/losses separately (net of tax).●Unusual Gains and Losses:○Not part of normal operations but still part of continuing activities.
●Changes in Accounting Principle:○Apply retrospectively.●Changes in Estimates:○Apply prospectively (e.g., depreciation).4. Comprehensive Income●Comprehensive Income= Net Income +Other Comprehensive Income (OCI)●OCI Examples:○Unrealized gains/losses on investments.○Foreign currency translation adjustments.○Pension adjustments.5. Key Terms to Know●Net Income●Earnings Per Share (EPS)●Discontinued Operations●Comprehensive Income●Unusual Gains/LossesQuick Tips for Chapter 41.Focus onhow items are classifiedon the income statement.2.Understand the difference betweenregular operationsandirregular items.3.Know how to calculate and reportEPS.4.Familiarize yourself withComprehensive Incomeand its components.A clear income statement helps users evaluate a company’s performance—master itsstructure!