The document is a presentation on an income statement for a company. It includes definitions of key elements of an income statement like revenues, expenses, gains and losses. It describes the two main types of income statements - single-step and multiple-step. It provides an example of a multiple-step income statement for Terry Manning Fashion Center for the year ended December 31, 2010, including calculations of net income and earnings per share.

1. PRESENTATION ON
INCOME STATEMENT

2. Name ID:
Sourav Saha 142-11-3939
Asraful Islam Topu 142-11-4046
Md. Faysal Ahmed 142-11-3944
Sharmin Akter 142-11-3935
Romana Afroz 142-11-3951
Pronob Kumar 141-11-3654
Nusrat jahan 142-11-3947
Faysal Hasan 131-11-3172
Name Of Group Members:

3. Welcome To Our
Presentation

4. An income statement is one of the financial statement of a
company and shows the company’s revenues and expenses
during a particular period. It provides investors and creditors
with information that helps them predict the amount, timing and
uncertainty of future cash flow.
Income statement:

5. Income statements should help investors and creditors
of financial statement predict future cash flow in a
number of ways:
 Evaluate the past performance of the enterprise.
 Provide a basis for predicting future performance.
 Help assess the risk of uncertainty of achieving
future cash flows.
Use fullness of income statement:

6.  Items that might be relevant but cannot be reliably
measured are not reported.
 Income numbers are affected by accounting methods.
 Income measurement involves judgments.
Limitation of income statement:

7. Revenues:
Inflow or other enhancements of assets of an entity of its
liabilities during a period from delivering or producing goods.
Expenses:
Outflows or other using-up of assets or incurrences of
liabilities during a period from delivering or producing goods.
Gains:
Increase in equity from incidental transactions of an entity
except those that result from revenue or investment by owner.
Losses:
Decreases in equity from incidental transactions of an entity
except those that result from expenses or distributions to
owner.
Elements of income statement:

8. 1. Single-step income statement.
2. Multiple-step income statement.
Types of income statement: (2 types)

9.  In reporting revenue, gains, expenses and losses, a format
known as the single-step income statement. In single-step
income statement just two types exist: revenue and expenses.
Expense are deducted from revenue then arrive to Net
income or losses.
Single-step income statement:

10. Calculating way of single-step income statement:
NET INCOME = Revenues - Expenses
Revenue
Expenses
Net Income
Earnings per share
Revenue:
Net sales
Dividend
Rental Revenue
Expenses:
Cost of goods sold
Selling expenses
Administrative expenses
Interest expenses
Income tax expenses

11.  A multiple-step income statement is used to recognize these
additional relationship. This statement recognize a separation
of operating transaction from non-operating transaction and
matches cost and expenses with related revenue.
Multiple-step income statement

12. Section of Income statement
Operating Section
Non-operating Section
Income Tax
Irregular items
Earnings per share
1
2
3
4
5
Sales Revenue
Less: cost of goods sold
Less: Selling expenses
Less: Administrative Expenses
Add: Other revenues and gains
Less: Other Expenses and losses
Discontinued Operations (net of tax)
Extraordinary Items (net of tax)
Cumulative Effect of a Change in
Accounting Principle (net of tax)

13. A discontinued operation occurs when the result of operation and
cash flows of a component of a company have been eliminated
from the going operation and there is no significant continuing
involvement in that component after the disposal transaction.
Irregular Items
Discontinued Operation

14. Extraordinary items are events and transactions that distinguished
by their unusual nature and by the infrequent of their occurrence.
Both of the following criteria must be met to classify an event or
transaction as an extraordinary item.
Extraordinary item
Unusual Gains & Losses
Items that are unusual OR infrequent, but not both.
If material, disclose separately.
Do not disclose, net of taxes

15. Change from one generally accepted principle to another.
Cumulative Effect of a Change in
Accounting Principle
Changes in Accounting Estimates
Normal, recurring corrections and adjustments.
Change in income statement only in the accounts affected.

16. Earnings per share is a significant business indicator figure.
Earnings per share is required to be disclosed on the income
statement for all the major sections. Earnings per share is subject
to reduction, if issue of additional shares is possible in the future.
Earnings per Share
Earnings per Share =
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 −𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑
𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑠ℎ𝑎𝑟𝑒

17. Problem
Solution of Income Statement

18. Terry manning fashion center
Trail Balance
December 31, 2010
Accounts Titles Debit Credit
Cash 5,30,000
Trade Accounts Receivable 8,20,000
Merchandise Inventory 3,40,000
Store Supply 10,000
Store Equipment 3,00,000
Accumulated Depreciation-Store Equipment 1,00,000
Delivery Equipment 4,00,000
Accumulated Depreciation- Delivery
Equipment
1,44,000
Notes Payable 61,000
Trade Accounts Payable 3,00,000
Terry manning, Capital 10,00,000
Terry manning, Drawing 2,00,000
Sales 32,71,000
Sales Return and Allowances 1,45,000
Purchase 16,00,000
Freight in 10,000
Salaries Expenses 2,40,000
Advertising Expenses 40,000
Utility Expenses 46,000
Delivery Expenses 45,000
Rent Expenses 1,50,000
Total 48,76,000 48,76,000

19. Adjustment data:
1. Store supplies on hand totaled 4,000.
2. Annual depreciation is TK 10,000 on the store equipment.
3. Interest of TK 5,000 is accrued on notes payable at December 31, 2010.
4. Merchandise Inventory on December 31, 2010 is TK 4, 40,000.
Other data:
a) Salaries Expenses is 60% administrative and 40% selling categories.
b) Rent Expenses and Utility Expenses are 50% administrative and 50% selling
categories.
c) The company suffered an unusual and infrequent pretax loss of TK 50,000 from a
volcano eruption.
d) The company purchased delivery equipment for distributing its finishing goods an
January 2, 2008. Its cost was TK 4, 00,000 with an estimated service life of 5years.
Salvage value was estimated to be TK 1, 00,000. Using declining balance method
of depreciation for 2008, 2009, and 2010 would be TK 80,000 TK 64,000 and
51,200 respectively. During 2010 the company’s management decided to change to
the straight-line method of depreciation.

20. e) It disposal of its restaurant division at pretax gain of TK gain of TK 60,000.
Prior to disposal, the division operated at after tax loss of TK 50,000.
f) The company recorded bad debt expense in the part at a rate of 2% of net
sales. In 2010, it has decided to increase its estimate to 4% of net sales.
If the new rate had been used in prior years, cumulative bad debt expense
would have been TK 1, 00,000 instead of TK 50,000. Bad debt expenses
are not recorded in 2010.
g) Company declared preferred dividend of TK 20,000 for 2010.
Consider effective Tax rate of 30% on all items.
Requirements:
a) Prepare a multiple-step income statement for 2010.
b) The corporation had 1, 00,000 shares of common stock authorized and
80,000 shares issued and outstanding during 2010. Compute 2010
earnings per share.

21. Terry manning fashion center
Income statement
For the year ended in December 31, 2010
Sales Revenue:
Sales
Less: Sales return & allowance
Net Sales
Less: cost of good sold
Merchandise Inventory
Purchase
Add: Freight in
Merchandise Inventory available for sale
Less: Merchandise Inventory December 31
Gross Profit
Less: operating expenses:
Selling expenses:
Salaries expenses( 2,40,000*40%)
Advertising expenses
Utility expenses(46,000*50%)
Delivery expenses
Rent expenses(1,50,000*50%)
Supply expenses(10,000-4,000)
Depreciation expenses
Depreciation expenses Delivery( Note:1)
Bad debt expenses(31,26,000*4%)
Total Selling expenses
16,00,000
10,000
96,000
40,000
23,000
45,000
75,000
6,000
10,000
60,000
1,25,040
32,71,000
1,45,000
3,40,000
16,10,000
19,50,000
4,40,000
4,80,040
31,26,000
15,10,000
16,16,000

22. Administrative expenses:
Salaries expenses( 2,40,000*60%)
Utility expenses(46,000*50%)
Rent expenses(1,50,000*50%)
Total Administrative expenses:
Total operating expenses:
Income from operation :
Less: other expenses and loss(interest not payable)
Income before Tax
Less: Income tax(8,88,960*30%)
Income from continuing operation :
Discontinuing operation :
Gain from disposal restaurant
division(60000*70%)
Loss from operation
Income before extraordinary items:
Extraordinary items:
Loss from volcano eruption(50,000*70%)
Cumulative effect of change in depreciation(Note:2)
Net Income
1,44,000
23,000
75,000
2,42,000
42,000
50,000
7,22,040
8,93,960
5,000
8,88,960
2,66,688
6,22,272
8,000
6,14,272
35,000
5,79,272
16,800
5,96,072

23. b)Earning Per share:
=
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒−𝑃𝑟𝑒𝑝𝑎𝑖𝑑 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑡
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑠ℎ𝑎𝑟𝑒
=
5,96,072−20,000
80,000
=7.20
Note:1
Depreciation Effect =
𝐶𝑜𝑠𝑡 𝑝𝑟𝑖𝑐𝑒−𝑆𝑎𝑙𝑣𝑎𝑔𝑒 𝑣𝑎𝑙𝑢𝑒
𝑈𝑠𝑒𝑓𝑢𝑙𝑙 𝑙𝑖𝑓𝑒
=
4,00,000−1,00,000
5
= 60,000
Note:2: Cumulative effect of change in depreciation:
Net at pay=24,000*70%
=16,800
Year Declining Method Striate-line Method Effect of change
2008 80,000 60,000 20,000
2009 64,000 60,000 4,000
Total= 24,000