Income Statement PresentationMay 20, 2009
Intermediate Accounting 303
Team 3: Ryan McKay
Cheer Cheng
Kristen Jeffries
Dr. Kirch
Acct 303
What is an Income Statement?
Attributed to FASB Statement of accounting concept 5 ¶ 30:51
AKA Earnings Statement
Discloses changes to the company including: Causes of changes to assets and liabilities
Results of major or ongoing operations
Results of the company’s transactions
Uses of the Income Statement Performance report for stated period.
Used to analyze future performance as well (5 ¶ 36) Considers risk and financial standing of the
company in its current period Limitations of an Income Statement
The Net income reported is a best “estimation” Takes into account several assumptions and
considerations Net income can be altered by different
accounting methods Example: Enron : Mark-to-Market
What is an Income Statement?
Three Types of Income Statements
Single Step Income Statement Expenses are deducted from revenue to get
net income
Not the best form to use Gives a very rough estimate
Very easy to use and simple
Multi-Step Income Statement Operating Section
Non-Section
Income Tax
Discontinued Operations
Extraordinary Items
Discloses Earning Per Share
Three Types of Income Statements
Multi-Step Income Statement
CK, Inc.
Income Statement
For the Year Ended December 31, 2008
Sales $ 400,000
Cost of Goods Sold 221,000
Gross Margin 179,000
Operating Expenses
Wage Expense $ 39,000
Rent Expense 48,000
Advertising Expense 12,000
Depreciation Expense 8,950
Bad Debt Expense 3,490
Insurance Expense 1,200
Total Operating Expenses 112,640
Income Before Other Items, Other Revenue
and Expenses, and Taxes 66,360
Other Items Affecting Operating Income
Gain on Sale of Fixed Assets 1,000
Income From Operations 67,360
Other Revenues & <Expenses>
Interest Expense (10,400)
Income Before Taxes 77,760
Tax Expense 9,240
Net Income $ 68,520
Earnings per Share $ 3.70
Condensed Income Statement Includes only the total expense in groups
Uses supplementary schedules to support the reconciliation of the expenses
Can be presented in various forms
Three Types of Income Statements
Irregular Items affecting Income
Irregular Items affecting an Income Statement
Discontinued Operations
Extraordinary Items
Unusual gains and/or losses
Disclosures and Notes of the Income Statement
Disclosure requirement-Items affecting earnings
Must state income tax
Change in accounting principles
Correction of previous errors