BS, Income Statement

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Section 1

Question Answer
income statementfinancial results of a company’s business activities over a period of time.
Revenueamounts charged for the DELIVERY of goods or services in the ORDINARY activities of a business.
Other incomeGAINS, which may or may not arise in the ordinary activities of the business
ExpensesOUTFLOWS, DEPLETIONS of assets, and incurrences of liabilities that DECREASE EQUITY
Expenses includeSALES COST (cost of goods sold), ADMIN expenses, and income TAX expenses and may be defined to include LOSSES
Net incomerevenue plus other income minus expenses
income statement equationRevenue + Other income – Expenses = Income – Expenses = Net income
one company (the parent) controls another company (the subsidiary)owns more than 50 percent of the voting shares of a subsidiary company, it is presumed to control the subsidiary and thus presents consolidated financial statements.
parent does not own 100 percent of the subsidiaryparent to present an ALLOCATION of net income to the minority interests.
Minority interestsowners of the REMAINING SHARES of the subsidiary that are NOT owned by the parent.
Basic earnings per shareusing the WEIGHTED-AVERAGE number of COMMON (ordinary) shares that were actually OUTSTANDING during the period and the PNL attributable to the common SHAREOWNERS
Diluted earnings per sharethe number of SHARES that would hypothetically be OUTSTANDING if potentially DILUTIVE CLAIMS on common shares (e.g., stock options or convertible bonds) were exercised or CONVERTED by their holders

Section 2

Question Answer
Other Comprehensive IncomeIMPACT owners’ EQUITY but are NOT the result of TRANSACTIONS with shareOWNERS.
statement of changes in equityREPORT changes in the owners’ INVESTMENT in the business over time
basic components of owners’ equityPAID-in CAPITAL and RETAINED earnings
Retained earningsCUMULATIVE amount of the company’s PROFITS that have been RETAINED in the company
other comprehensive income itemsNON-CONTROLLING or minority INTERESTS and RESERVES

Section 3

Question Answer
Cash Flow StatementSOURCES and USES of cash helps creditors, investors, and other statement users EVALUATE the company’s LIQUIDITY, SOLVENCY, and financial FLEXIBILITY.
Financial flexibilityability of the company to REACT and ADAPT to financial ADVERSITIES and OPPORTUNITIES
cash flows of the company into three categoriesoperating, investing, and financing
operating activitiesInvolve the CASH EFFECTS of transactions that enter into the determination of net income and, hence, comprise the day-to-day operations of the company.
investing activitiescash flows from activities associated with the ACQUISITIONS and DISPOSAL of LONG-term assets, such as property and equipment.
financing activitiesCFS from activities related to OBTAINING or REPAYING CAPITAL to be used in the business
indirect method. This approach to reporting cash flow from operating activities
direct methodCFS from OPERATING activities discloses major classes of GROSS cash RECEIPTS and PAYMENTS.