The components of the multiple-step income statement Gross profit is the excess

Question

The components of the multiple-step income statement Gross profit is the excess of sales revenue over cost of goods sold during the period This section is of particular interest to retailers and manufacturing companies because it is a measure of the initial profit a company makes from selling its product It can give insight into a company's pricing and purchasing policies. Which type of company would you expect not to report cost of goods sold and gross profit? Gross profit: ales -Cost of goods sold Gross profit Operating income: Gross profit Operating expenses Operating income Operating income is calculated by deducting operating expenses from gross profit. Operating expenses are the expenses incurred during normal operations. These expenses are recurring in that they are generally incurred each period. Operating income measures the profit earned by the principal activities of the company. It is often used to compare the profitability of two or more companies or divisions within the same company. Which of the following would not be listed with operating expenses? Net income: Operating income +/-Excess of other revenue and expenses Net income Net income is the amount that the company has earned from all activities-operating and nonoperating. The excess of other revenues and expenses must first be calculated. The net amount is added to or subtracted from (depending on whether revenues or expenses are greater) operating income to determine net income. If other revenues exceed other expenses, the excess wil be operating income. A net loss occurs when total expenses have exceeded total revenues. Net income (loss) is transferred to recall is the accumulation of earnings that has not been distributed to stockholders which you may

Explanation / Answer

a) Many service companies do not have any cost of goods sold at all. Cost of goods sold (COGS) is not addressed in any detail in generally accepted accounting principles, or GAAP, but COGS is defined as only the cost of inventory items sold during a given period. Not only do service companies have no goods to sell, but purely service companies also do not have inventories. If COGS is not listed on the income statement, no deduction can be applied for those costs.

Not for profit describes a type of organization that does not earn profits for its owners. All of the money earned by or donated to a not-for-profit organization is used in pursuing the organization's objectives and keeping it running. Typically, not-for-profit organizations are charities or other types of public service organizations. Such type of organization do not have any gross profit and cost of goods sold

b) An expense incurred in carrying out an organization's day-to-day activities, but not directly associated with production. Operating expenses include such things as payroll, sales commissions, employee benefits and pension contributions, transportation and travel, amortization and depreciation, rent, repairs, and taxes. These expenses are usually subdivided into selling expenses and administrative and general expenses. Also called non-manufacturing expenses

                                                  

c) net income is transferd to either capital account or profit and loss appropriation acount

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