Income & Retained Earnings Statement Categories Unusual or Infrequent Items (if material, but not extraordinary) –part of Income from Continuing Operations.

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Presentation transcript:

Income & Retained Earnings Statement Categories Unusual or Infrequent Items (if material, but not extraordinary) –part of Income from Continuing Operations –not part of Operating Income Discontinued Operations –Separately stated after Income from Continuing Operations Extraordinary Items –unusual in nature & infrequent in occurrence –separately stated (after tax) after Discontinued Operations Change in Accounting Principle –Cumulative Effect -- separately state after extraordinary items –Restatement -- place as a separate category in retained earnings Correction of an Error –place as a separate category in retained earnings

The Statement of Owners Equity Beginning Capital + Net Income - Owner withdrawals = Ending Capital

Statement of Retained Earnings Beg. Ret. Earnings + Net Income - Dividends = Ending Capital Beginning Retained Earnings (as originally reported) +/- Correction = Beginning Retained Earnings as Adjusted + Net Income - Dividends = Ending Capital

Statement of Retained Earnings –May be separately presented or appended to the Income Statement. –Of great interest to shareholders. –Appropriations: The ear-markings of retained earnings for a future purpose. It is really a statement of management intention. Appropriations of retained earnings in NO WAY provides funds for the intention..

Comprehensive Income Comprehensive incomeComprehensive income includes all changes in equity during the period except those resulting from investments by owners and distributions to owners. –Components of comprehensive income are to be displayed in one of three ways: A separate income statement. A combined income statement of comprehensive income. As a part of stockholder’s equity. –Regardless of format comprehensive income will be presented in the stockholders’ equity section of the balance sheet.

Comprehensive Income Explains the change in retained earnings during the period due to: Income Statement Items (used to calculate Net Earnings (loss): –operating activities –other continuing operations –discontinued operations –extraordinary items –changes in accounting principles Other Comprehensive Income Items: –foreign currency translation –Unrealized gains/losses on securities –minimum pension liability –& other comprehensive income items –(does not yet fully explain the change in retained earnings during the period to all non-owner transactions)