Accounting 3305 – Income Statement

These flashcards cover key vocabulary terms related to income statements and accounting concepts.

Income Statement

Reports a company’s revenues, expenses, gains, and losses over a period of time.

Revenue

Inflows of resources from providing goods or services to customers.

Expenses

Outflows of resources incurred to generate revenue.

Gains

Changes in equity from peripheral or incidental transactions.

Losses

Changes in equity from peripheral or incidental transactions.

Gross Revenue

Total sales before deductions.

Net Revenue (Net Sales)

Gross revenue minus returns, allowances, and discounts.

Cost of Goods Sold (COGS)

Direct costs of producing goods sold.

Gross Profit

Revenue minus Cost of Goods Sold.

Operating Expenses

Costs related to normal business operations (SG&A, depreciation, amortization).

Operating Income (EBIT)

Gross profit minus operating expenses.

Non-Operating Items

Revenues, expenses, gains, or losses not related to core operations.

Income from Continuing Operations

Income from normal business activities after taxes.

Discontinued Operations

Results of operations of a business component that has been eliminated and represents a strategic shift.

Unusual Items

Events with a high degree of abnormality and infrequency.

Net Income

Final profit or loss after all revenues, expenses, taxes, and special items.

Earnings Management

Timing of revenues and expenses to achieve a desired earnings result.

Pro Forma Income Statement

Projected income statement prepared using assumptions.

Revenue Recognition

Recognizing revenue when performance obligations are satisfied.

Change of Control

Transfer of control of goods or services from seller to buyer.

Accrual Accounting

Accounting method recognizing revenues and expenses when earned or incurred.

Matching Principle

Expenses are recorded in the same period as related revenues.

Depreciation

Allocation of the cost of a tangible asset over its useful life.

Warranty Expense

Estimated cost of future warranty obligations matched to current sales.

Other Comprehensive Income (OCI)

Unrealized gains and losses that affect equity but bypass net income.

Comprehensive Income

All changes in equity except owner investments and distributions.

Earnings Per Share (EPS)

Net income available to common shareholders divided by weighted average shares outstanding.

Inflows of Resources

Increase in assets due to sales of goods or services.

Outflows of Resources

Decrease in assets due to expenses incurred.

Peripheral Transactions

Transactions that are not part of the core business activities.

Equity Changes

Increases or decreases in owner’s stake in a business.

Direct Costs

Expenses that can be directly linked to the production of goods.

Normal Business Operations

Activities that are part of the routine function of a business.

Income Tax Expense

Tax liability incurred from income earned.

Weighted Average Shares

Average number of shares outstanding during a reporting period.

Projected Revenue

Estimated future sales based on current data.

Financial Reporting Standards

Guidelines for financial reporting compliance.

Earnings Quality

The sustainability and reliability of reported earnings.

Strategic Shift

A significant change in a company’s operational focus.

Unrealized Gains

Increase in value of an asset not yet sold.

Unrealized Losses

Decreases in value of an asset not yet sold.

Amortization

Gradual writing off of an intangible asset.

Gross Revenue Calculation

Total sales before any deductions.

Market Trends

Patterns in consumer behavior and financial outcomes.

Firm Performance Metrics

Measures used to assess a company’s financial health.