Professional Documents
Culture Documents
$ 160,000
$ 40,000
26,100
20,500
11,300
5,000
102,900
$ 57,100
5. Expenses are presented after the income accounts. It is a good practice to arrange expenses according
to amount (largest to smallest). Some users who are interested in the company's expenses are
concerned about the size of each expense. Arranging the expenses from largest to smallest results in a
more useful and organized report. Nonetheless, Miscellaneous Expense or Sundry Expense is presented
last.
6. If income exceeds expenses, there is a net income. If expenses exceed income, there is a net loss.
Notice how computations are presented. A single line is drawn every time an amount is computed. The
resulting amount is double-ruled when it is no longer followed by any operation. For
example, $57,100 (the net income).
7. The income statement complies with the accrual basis of accounting. Income is recognized when
earned regardless of when collected. Expenses are recognized when incurred regardless of when paid.
This means that income and expenses presented in the income statement have been earned and
incurred, respectively. Nonetheless, it does not mean that they have all been collected or paid.
8. International accounting standards suggest that companies should present other comprehensive income
in their financial statements. A Statement of Comprehensive Income shows the contents of an income
statement followed by a list of "other comprehensive income".
9. Other comprehensive income includes gains and losses that cannot be reported as profit and loss,
such as unrealized gains and losses, and revaluation surplus. This is taken up in higher financial
accounting studies.
10. When the company does not have other comprehensive income, the contents of the income statement
and the statement of comprehensive income are the same. In any case, international accounting
standards favor the use of the title "Statement of Comprehensive Income".
$ 160,000
$ 40,000
26,100
20,500
11,300
5,000
102,900
$ 57,100
$ 57,100
$ 20,000
10,200
30,200
$ 87,300