ACC 414 Chapter Notes - Chapter 4: Earnings Management, Net Income, Income Statement

• School: Ryerson University
• Department: Accounting
• Course: ACC 414
• Professor: Else Grech

Document Summary

Usefulness of the income statement: evaluate the enterprises past performance and profitability, provide a basis for predicting future performance, helpassess the risk or uncertainty of achieving future cash flows. Limitations of the income statement: net income is not a point estimate calculated based on numerous assumptions. A mix of hard numbers (easy to measure and a high level of certainty) and soft numbers (difficult to measure ) Items that cannot be measured reliably are not reported in the income statement. Income numbers are affected by the accounting methods that are used. Differing views of how to measure net income. Quality of earnings (nature of the content and the way it is presented: content of the earnings information. Multi-step income statements: more informative and more useful income statement by presenting other important revenue and expenses, seperates operating and non operating transactions, matches costs and expenses with their related revenue.