Chapter 9 - The income statement and the statement of cash flows. After reading this chapter, you should be able to answer the following questions: What is revenue, and what are the two criteria that permit revenue recognition? How is cost of goods sold determined under both perpetual and periodic inventory accounting systems? What is the significance of gross profit, and how is gross profit calculated and used? . | 2008 The McGraw Hill Companies Inc. All Rights Reserved. McGraw Hill Irwin Copyright 2014 by The McGraw Hill Companies Inc. All rights reserved. Chapter 9 The Income Statement and the Statement of Cash Flows PowerPoint Authors Susan Coomer Galbreath . CPA Charles W. Caldwell . CMA Jon A. Booker . CPA CIA Cynthia J. Rooney . CPA McGraw Hill Irwin Copyright 2014 by The McGraw Hill Companies Inc. All rights reserved. 1-3 Learning Objectives After studying this chapter you should understand and be able to 1. Explain what revenue is and what the two criteria are that permit revenue recognition. 2. Describe how cost of goods sold is determined under both perpetual and periodic inventory accounting systems. 3. Discuss the significance of gross profit and describe how the gross profit ratio is calculated and used. 4. Identify the principal categories and components of other operating expenses and show how these items are reported on the income statement. 5. Explain what income from operations includes and why this income statement subtotal is significant to managers and financial analysts. 6. Describe the components of the earnings per share calculation and discuss the reasons for some of the refinements made in that calculation. 7. Compare and contrast the alternative income statement presentation models. 8. Discuss the meaning and significance of each of the unusual items that may appear on the income statement. 9. Describe the purpose and outline the general format of the statement of cash flows. the difference between the direct and indirect methods of presenting cash flows from operating activities why the statement of cash flows is significant to financial analysts and investors. 3 9 3 McGraw Hill Irwin 2008 The McGraw Hill Companies Inc. All Rights Reserved. 1-4 L O 1 Income Statement Revenue is generated when a firm sells a product or provides a service to a client or customer and receives cash creates an account .
