Income Statement
Income statement (profit and loss statement,
statement of earnings, statement of
operations) is accounting report that
summarizes the revenues and the expenses,
report the results of operation and indicates
reason for the entity’s profitability (or lack
thereof) of an accounting period. It is a flow
report, as contrasted with the balance sheet,
which is a status report.
Basic accounting Concepts: The
Income Statement
Basic Business Financial Flows
Cash
Purchasing or
production
activities
Collection
activities
Accounts
receivable
Inventories
Earnings
activities
Basic accounting Concepts: The
Income Statement
6. The Accounting Period Concept
Accounting measures activities for a specified
interval of time, called the accounting period.
7. The Conservatism Concept
This concept suggests the period when revenue
and expense should be recognized.
– Recognize revenues (increases in retained
earnings) only when they are reasonably
certain.
– Recognize expenses (decreases in retained
earnings) as soon as they are reasonably
possible.
Basic accounting Concepts: The
Income Statement
8. The Realization Concept
This Concept indicates the amount of revenue that
should be recognized from given sale, refers to
inflows of cash or claim to cash arising from sale
of goods or services.
... That the amount recognized as revenue is the
amount that is reasonably certain to be realized.
9. The Matching Concept
When a given event affect both revenues and
expenses, the effect on each should be recognized
in the same accounting period.
Basic accounting Concepts: The
Income Statement
10.The Consistency Concept
This concept states that once an entity has decided
on one accounting method it should use the same
method for all subsequent events of the same
character unless it has a sound reason to change
methods.
11.The Materiality Concept
The Accountant does not attempt to record events
so insignificant that the work of recording them is
not justified by the usefulness of the results.
Basic accounting Concepts: The
Income Statement
GARSDEN CORPORATION
Income Statement
For the Year Ended December 31, 2000
Net sales
Cost of sales
Gross margin
Research and development expense
Selling, general, and administrative expenses
Operating income
Other revenues (expenses):
Interest expense
Interest and divident revenues
Royalty revenues
Income before income taxes
Provision for income taxes
Net income
Earning per share of common stock
75,478,221
52,227,004
23,251,217
2,158,677
8,726,696
(363,000)
43,533
420,010
10,885,373
12,365,844
100,543
12,466,387
4,986,555
7,479,832
6.82
STATEMENT OF RETAINED EARNINGS
Retained earning at geginning of year
Add: Net income
Deduct: Dividents ($4 per common share)
Reatained earning at end of year
Basic accounting Concepts: The
Income Statement
16,027,144
7,479,832
(4,390,000)
19,116,976