The Income Statement The income statement is “a financial statement listing all revenue and expenses for a fiscal period leading to net income or net loss: a statement that describes the operations of a business over a period of time (fiscal period)” (Kravitz, 1999 p63). The income statement is therefore a financial statement that shows the results of the operations of a business. This involves financial information about the income that a business makes and the expenditure that the business incurs over a given period of time. In effect, the income statement matches the revenue of a business with its expenses and provides the net income or net loss. In other words, the income statement provides an insight into the kind of revenue inflows and outflows that were incurred during the normal trading activity of the business. Another aspect of the income statement is that it is a period statement. In other words, it captures the financial picture of a business's trading activities over a defined period of time. This means that the income statement is mainly concerned with how a business performed in trade over the specified period of time. Tracey (2009) identifies that the main purpose of the income statement is to identify the profit or loss made by a business in a given period of time (p13). This means that the income statement identifies the performance of a business in terms of how much profits or losses that the business made over the specified period for which the accounts were prepared. This shows clearly that the income statement is mainly a tool for the measurement of the financial viability or otherwise of a given business in a stated period of time. “The income statement summarizes the sales revenue and expenses of a business for a period, usually 1 year” (Tracey, 2009 p13). This indicates that most businesses prepare their income statements over a period of 12 months. The GAAP and other legal statutes require businesses to prepare financial statements once every 12 months. However, in some instances, a business might opt to prepare an income statement for periods that are less or more than the 12 month period. If a business began trading in the middle of they year, they many prepare income statements for a period that is less than 12 months. Such a financial statement might be pro-rated for taxation and other financial purposes. This means that the number of months for which the accounts were prepared will be identified and divided by the 12 months period to find out the true worth for certain statutory purposes like tax. Typically, the tax rate that is invoked on such a business is calculated by identifying the number of months for which the accounts were prepared and dividing it by 12 before the figures are multiplied by the annual tax rate. The main motive is that income statements must be prepared over a given period and there should be definite cut offs within which the income and expenditure captured are compared. Tracey (2009 p13) identifies four main steps in the preparation of income statements. In the first step, the sales revenue is matched with the cost of goods or services that were sold. In other words, this involves the matching of income or payments made by customers to the business against the cost the business incurred in producing the goods sold.
Introduction This paper focuses on the practical aspects of financial statements. It is written in three parts. The first part examines the components of the income statement and how it can be applied to everyday life in a business. The second part discusses the benefits that a business manager can get if s/he understands the income statement…
Theoretically, market has a beta of 1.0 and the stock beta calculated show how much they deviate from the market. In 2006 and 2007, Tesco Plc stocks showed a high beta indicating a higher return but are riskier. Negative return is shown in 2008 as an effect of the share market plunge following the global recession but was slowly recovered from 2009.
The income statement is often prepared by public companies on a quarterly basis. The purpose of the income statement is to show the profitability of a company (Weygandt & Kieso & Kimmel, 2002). The income statement contains two types of information. It provides data regarding the revenues and expenses of a corporation.
Some of these variances in presentation can be seen in the comprehensive income statement presentation. There are several examples to illustrate this. IFRS 5, for example, requires that post-tax loss/income be part of the disclosures in the statement of comprehensive income or be put in another income statement’s contents where this is applicable.
This paper will review a financial statement of a local government in Virginia and analyze the method of accounting used for the funds. It will evaluate the use of the method of accounting for the funds as required by GASB, and assess the application and compliance of GASB statement number 34.
This is because the major priority of the financial statements produces it to report on near term inflows and outflows. The general fund exists among the county’s major fund and other government funds. The cash basis accounting chosen by the accounting team of the company is very convenient.
This particular standard has been periodically amended from time to time either to bring in more transparency in the way the financial reports are presented or to bring it in line with other IASs as a result of amendment in other IAS. Various amendments and reformatting brought about at various points of time were critically analyzed from their utility and ease of use by various stakeholders.
Negative return is shown in 2008 as an effect of the share market plunge following the global recession but was slowly recovered from 2009. 10
This report discusses the finance performance and position of Tesco Plc for
According to the discussion financial statement analysis is differentiated from other approaches fundamentally because its main function is to assess the financial condition of an organization based on its financial statement. Several types of analyses can explain an organization’s financial condition.
Financial statements of one accounting period must be comparable to other financial statements in order for the financial statement users to be able to derive meaningful conclusions concerning the trends of the financial position. It is very important for investors to have comparable financial information to make an optimal investment decision.
This coursework aims to investigate the issues related to the European Union adoption of International Financial Reporting Standards (IFRS), focusing on the reasons, the effects, and consequences of its adoption. The remainder of the paper is structured as follows: Section 1
3 pages (750 words)Essay
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