Category: Financial Statements

Manufacturing Business

Profit and loss account of a trading business must contains the cost of goods actually sold. The cost of goods purchased and held in stock must be excluded. For same reason the profit and loss account of a manufacturing business must only contain the manufacturing costs of goods actually sold in the period.  The manufacturing […]

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Balance Sheet

What is a Balance Sheet To understand this subject,please think of the literal meaning of the words ‘balance’ and ‘sheet’. Balance, this means that the balance sheet must be balance. There are two parts to it and each part must total to the same figure. Put another way, the sum of the debit balances must […]

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Multiple-Step Income Statement

First look as below picture that is an example of Multiple-Step statement The multiple-step income statement presents figures significant in the determination of net income. Its various classifications define the on-going operations of the business entity, providing a perspective as to its flow of revenues and expenses. The usual multiple-step classifications are: Revenue From Sales: In this section, usually called […]

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Single-Step Income Statement

First look at below picture:   A simple, condensed statement devoid of all classification except the general groupings: Revenues Cost and expenses has been developed for stockholders’ reports and other special uses. Section labeling is at a minimum. The single-step format does not recognize intermediate stages such as gross profit from operations or income before extraordinary items. All income, […]

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Income Statement Concepts

Extraordinary Items: There have existed over the years differences with respect to the income statement regarding the proper presentation of extraordinary items as well as adjustments and corrections from prior periods. Two procedures are now considered acceptable alternative treatments: Current Operating performance Concept. Extraordinary items are omitted from the income statement and are closed directly to the statement […]

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