PRESENTATION ONINCOME

STATEMENT

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:

Welcome To Our Presentation

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:

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:

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:

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:

1. Single-step income statement.2. Multiple-step income statement.

Types of income statement: (2 types)

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:

Calculating way of single-step income statement:

NET INCOME = Revenues - Expenses

Revenue

Expenses

Net Income

Earnings per share

Revenue:Net salesDividend

Rental Revenue

Expenses: Cost of goods sold

Selling expenses Administrative

expenses Interest expenses

Income tax expenses

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

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)

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

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

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.

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 =

Problem Solution of Income

Statement

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

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.

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.

Terry manning fashion center Income statement

For the year ended in December 31, 2010 Sales Revenue: SalesLess: Sales return & allowance Net SalesLess: cost of good sold Merchandise Inventory Purchase Add: Freight inMerchandise Inventory available for saleLess: Merchandise Inventory December 31 Gross ProfitLess: 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

16,00,00010,000

96,00040,00023,00045,00075,0006,000

10,00060,000

1,25,040

32,71,0001,45,000

3,40,000

16,10,00019,50,000

4,40,000

4,80,040

31,26,000

15,10,00016,16,000

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

1,44,00023,00075,000

2,42,000

42,00050,000

7,22,0408,93,960

5,0008,88,9602,66,6886,22,272

8,0006,14,272

35,0005,79,272

16,8005,96,072

b)Earning Per share: = =

=7.20Note:1Depreciation Effect =

= = 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 20,0002009 64,000 60,000 4,000

Total= 24,000