ACC 305 Lecture Notes - Lecture 5: Income Statement, Financial Statement, Retained Earnings

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orangegnat648

10 Mar 2019

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The income statement measures and reports the financial results of a firm"s performance for a period of time, usually a quarter or a year. It provides information about the profits or losses the company has generated during the period by conducting operating, investing, and financing activities. Revenues measure the inflows of assets and settlements of obligations from selling goods and providing services to customers. Expenses measure the outflows of assets that a company consumes and the obligations it incurs in the process of operating the business to generate revenues. Net income (or net loss) measures the bottom-line profit (or loss) of a company for the period. Net income = revenues expenses + gains losses. Reports for a period of time the net cash flows (inflows minus outflows) from operating, investing, and financing activities. Provides useful information about how a firm is generating and using cash. Complements the income statement, demonstrating how cash flows differ from accrual-based income.

Related Questions

Which of the following statements are correct (Select all that apply):

A. A balance sheet reports on investing and financing activities.

B. An income statement reports on financing activities.

C. The statement of equity reports on changes in the accounts that make up equity.

D. The statement of cash flows reports on cash flows from operating, investing, and financing activities over a period of time.

E. A balance sheet reports on a company's assets and liabilities over a period of time

orchidhorse286

Please use the Ross, et al âFundamentals of Corporate Financeâas a resource in solving

the problems.

Select all that are true

.a) Accounting emphasizes the determination of net income whilethe emphasis in Finance is on net cash flow.

b) Net cash flow generally differs from net income because someof the expenses and revenues listed on the income statement are notpaid out or received in cash during the year.

c) Net cash flow does not include after tax interestexpense.

d) Free cash flow is the cash flow actually available fordistribution to investors after the company has made all theinvestments in fixed assets, new products, and operating workingcapital necessary to sustain ongoing operations.

2. The following statements are about the cash flow statements.Select all that are true.

a) The CF statement is an expanded version of the companyâs cashaccount.

b) The CF statement allows interested parties to understandwhere its money is coming from and how it is being utilized.

c) The CF Statement works with a tangible variable calledcash.

d) It measures performance using accrual accounting.

e) It includes depreciation and amortization in itstransactions.

f) The aim of the CF statement is to measure the change in cashfrom the beginning of one accounting period to the end of anotheraccounting period.

pearmink906

Which of the following statement is incorrectregarding the investing activities section of the statement of cashflows?

		Investing activities deal with long-term liabilities (debt) andequity accounts.
		Increases in long-term asset balances suggest cash outflows topurchase assets.
		Decreases in long term asset balances suggest cash inflows fromselling assets.
		Investing activities involve cash purchases and cash disposalsof long-term assets.

Which of the following statements iscorrect?

		Investors need to understand that the value of a company'searnings per share is affected by its choices of accountingprinciples and assumptions.
		Earnings per share is calculated for a company's preferredstock.
		The most widely quoted measure of a company's earningsperformance is return on equity.
		The book value per share measures the market value of acorporation's stock.

Which of the following statements is incorrectregarding preparing a statement of cash flows using the directmethod?

		The direct method shows adjustments to net income.
		The direct method shows the specific sources and uses of cashthat are associated with operating activities.
		Noncash expenses, gains, and losses are not used in thedetermination of net cash flow from operating activities.
		A majority of companies use the indirect method rather than thedirect method.

Which of the following statements regarding a process costsystem is false?

		Use of a process cost system would be appropriate for a companythat manufactures luxury yachts.
		Unit costs are computed for each department.
		The number of equivalent whole units for a period takes intoaccount the stage of completion of ending work in processinventory.
		Unit cost is determined for a designated period of time.

salmoncat986

ACC 305 Lecture Notes - Lecture 5: Income Statement, Financial Statement, Retained Earnings

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