| Accounting: What the Numbers Mean, 5/e David H. Marshall,
Millikin University Wayne W. McManus,
International College of the Cayman Islands Daniel F. Viele,
Webster University
The Income Statement and the Statement of Cash Flows
Chapter 9 Learning ObjectivesAfter studying this chapter, you should understand:
1.What revenue is and what the two criteria are that permit revenue recognition. |
| | | 2.How cost of goods sold is determined under both perpetual and periodic inventory accounting systems. |
| | | 3.The significance of gross profit (or gross margin) and how the gross profit (or gross margin) ratio is calculated and used. |
| | | 4.The principal categories and components of "other operating expenses" and how these items are reported on the income statement. |
| | | 5.What "income from operations" includes and why this income statement subtotal is significant to managers and financial analysts. |
| | | 6.The components of the earnings per share calculation and the reasons for some of the refinements made in that calculation. |
| | | 7.The alternative income statement presentation models. |
| | | 8.The unusual items that may appear on the income statement,
including
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Discontinued operations.
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Extraordinary items.
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Minority interest in earnings of subsidiaries.
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Cumulative effect of a change in accounting principle
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| | | 9.The purpose and general format of the statement of cash flows. |
| | | 10.The difference between the direct and indirect methods of presenting cash flows from operating activities. |
| | | 11.Why the statement of cash flows is significant to financial analysts and investors who rely on the financial statements for much of their evaluative data. |
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