Balance Sheet Ratios and Debt Contracts When a company borrows money, it often agrees to certain restrictions on activity. Ratios typically part of the borrowing agreement includes: Classified income statement Classified Income Statement may contain five sections: Continuing operations Discontinued operations Extraordinary items Cumulative effect of changes in accounting methods Earnings per share (EPS) Other Items Reported on the Income Statement In addition, companies may have non-recurring items. These non-recurring items may include: Discontinued operations, Extraordinary items, Cumulative effect of changes in accounting methods. These items are reported separately because they are not useful in predicting future income of the company. Extraordinary Items Unusual Infrequent Show net of applicable taxes. Cumulative Effect of Changes in Accounting Methods from one GAAP method to an alternative GAAP method The change must be to a preferable method and must be disclosed in notes to financial statements General Format for the Classified Income Statement: Gross sales minus any discounts, returns, and allowances during the period. Cost of inventory sold.
Balance Sheet Ratios and Debt Contracts When a company borrows money, it often agrees to certain restrictions on activity. Ratios typically part of the borrowing agreement includes: Classified income statement Classified Income Statement may contain five sections: Continuing operations Discontinued operations Extraordinary items Cumulative effect of changes in accounting methods Earnings per share (EPS) Other Items Reported on the Income Statement In addition, companies may have non-recurring items. These non-recurring items may include: Discontinued operations, Extraordinary items, Cumulative effect of changes in accounting methods. These items are reported separately because they are not useful in predicting future income of the company. Extraordinary Items Unusual Infrequent Show net of applicable taxes. Cumulative Effect of Changes in Accounting Methods from one GAAP method to an alternative GAAP method The change must be to a preferable method and must be disclosed in notes to financial statements General Format for the Classified Income Statement: Gross sales minus any discounts, returns, and allowances during the period. Cost of inventory sold.
financial_accounting_-_summary.docx