Question

1.Explain how accountants measure income?

2.Distinguish between net income, comprehensive income, and continuing income. Cite examples of items that create differences between these three income measures.

3.Although comprehensive income is the bottom line income number, it is rarely reported in the income statement. Where will you typically find details regarding comprehensive income?

4.How does accounting define an extraordinary item? Cite three examples of such an item. What are the analysis implications of such an item?

Answer 1

1) Income measurement is the calculation of profit or loss. For an accountant, income is what's left over after subtracting all of an organization's expenses. Income = Revenue - Expenses

2) Comprehensive income is equal to net income plus other comprehensive income.

  The income from continuing operations is the revenue that a business generates from its primary business activities minus the expenses that it incurs in generating income.