ACCT 301 - Income Statement

Income Statement

A financial statement that reports revenues, expenses, gains, losses, and net income or loss over a period of time.

Limitations of the Income Statement

It relies on estimates, excludes some items that cannot be reliably measured, and can be affected by differences in accounting methods.

Multiple-Step Income Statement

An income statement that separates operating and non-operating activities and reports subtotals such as gross profit and income from operations.

Net Sales

Sales revenue minus sales returns, allowances, and discounts.

Gross Profit

Net sales minus cost of goods sold.

Income from Operations

Gross profit minus operating expenses.

Operating Activities (Income Statement)

Activities related to a company's primary business operations, including sales and operating expenses.

Restructuring Costs

Costs associated with reorganizing business operations, such as employee severance or closing facilities; generally reported as operating expenses.

Non-Operating Income and Expenses

Revenues, gains, expenses, and losses outside a company's primary business operations, such as interest revenue and interest expense for a typical nonfinancial company.

Income Before Income Taxes

Income from operations plus non-operating revenues and gains, minus non-operating expenses and losses.

Income from Continuing Operations

Income from ongoing business activities after applicable income taxes.

Discontinued Operations

A disposed-of or held-for-sale component that meets the accounting requirements for separate reporting.

Discontinued Operations Reporting

Discontinued operations are reported separately from continuing operations, net of applicable income tax effects.

Tax Benefit on a Loss

The tax savings associated with a deductible loss, calculated as the loss multiplied by the tax rate when the assumed tax treatment applies.

Tax Expense on a Gain

The tax associated with a taxable gain, calculated as the gain multiplied by the tax rate when the assumed tax treatment applies.

After-Tax Loss

Loss minus the related tax benefit.

After-Tax Gain

Gain minus the related tax expense.

Net Income

The amount remaining after all applicable expenses, including income taxes, are deducted from revenues and gains.

Basic Earnings Per Share (EPS)

The amount of income attributable to each common share.

Basic EPS Formula

(Net income − Preferred dividends) ÷ Weighted-average common shares outstanding.

Weighted-Average Common Shares Outstanding

The average number of common shares outstanding during a period, weighted by the time each share amount was outstanding.