Accounting Policies, Income Statement and Related Items

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Abstract

GAAP requires company to disclose accounting policy in their financial reports. These policies provide relevant information to decision makers on choices taken by executives. Financial statements are the final product of accounting process. Income statement provides data for investment and other decisions. The net income is essentially the common income statement form, consisting of classifications such as income from continuing operations, discontinued operations, extraordinary items, and cumulative effects of changes in accounting principles. In this study we investigate the relative ability of comprehensive income and net income to summarize firm performance. Per statement of financial accounting standards no. 220 (SFAS
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It is the income of a company from any transaction that does not involve an owner's investment or distribution to an owner. It includes all non-owner changes in equity (in contrast to net income which does not include some changes in equity).
Statement of Financial Accounting Standards No. 220 (SFAS 220-10-1) states that the purpose of reporting comprehensive income is to report a measure of all changes in equity of an entity that result from recognized transactions and other economic events of the period other than transactions with owners in their capacity as owners. Per statement of financial accounting standards no. 220 (SFAS 220-10-2), if used with related disclosure and other information in the financial statements, the information provided by reporting comprehensive income should assist investors, creditors, and others in assessing an entity’s activities and the timing and magnitude of an entity’s future cash flows.(FASB.org)
Net Income Classifications
Net income is the residual income of a firm after adding total revenue and gains and subtracting all expenses and losses for the reporting period. Net income can be distributed among holders of common stock as a dividend or held by the firm as an addition to retained earnings.
The net income category is essentially the common
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