Income Statement

On Your Test

You will be expected to know the following for multiple choice concept questions. Almost all questions will relate to these things:

When revenues are recognized
When expenses are recognized

What the accrual method of accounting requires

The application of the matching principle

What type of accounts are reported as part of:
Gross profit
Operating expenses
Other revenues and expenses
Discontinued operations

The definition of each subtotal on the income statement

How the income statement is used by investors.

The format of the multi-step income statement

The format of the single step income statement

You will be asked to do the following on problems and multiple-choice problems that require calculations. It boils down to this:

Prepare an income statement in proper format given a list of accounts.

Determine the total for a given category on the income statement