Revenue is income generated from continuing operation of a business.

Gain is something that is outside of continuing operation, like a if a oil company sells its building at profit, that is gain

Two types: Single step (Revenue-Expense)

Multistep NI (that shows multiple steps in order to reach NI, see next card)

Explain MultiStep NI

Sales

-COGS

Gross income/GM

-operating expense

operating income

+-other revenue & Expense

NI before tax

- income tax

Net Income, Earning per share

+-gain/lossDiscontinued item

+-gain/loss from Extraordinary item

When a Co. has profit it has two way: either distribute it as dividend or retained that profit/earnings to reinvest and make more profit.

RE does not include investment by owner (investments) and distribution to owners (dividends)

Statement of Retained Earnings

 RE @ beg. --

+NI

-Dividend

-Investment

RE at yeat end

According to FASB 154, cumulative effect of change in accounting principal is added to the RE and show on the statement of RE. Earlier in 2005 it used to be part of statement of NI

to get useful information to creditors or inteded user (third party)

Get latest info about cash flow

Qualitative and Quantitative

Qualitative: Understandable, Usefull

To be useful, accouting information must be both relevant & reliable