OMM 622 Week 3 Assignment Income Statement
Providing details only on earnings is created by transactions from the general ledger. This statement, also known as the income statement is separated into three areas of cost: direct cost, indirect cost and non-operating items, leaving a net income of gain or loss. Being able to tell a story about profitability gives investors a new way to review income over a period of time due to earnings activities.
Generated by the inflow of assets or receivable of liabilities, revenue makes up an important factor in creating a company’s gross profit. In addition to the outcome of gross profit, costs of goods have to be provided. This cost includes the charge of product minus the cost it takes to create it. “COGS is recognized in the same period as the related revenue, so that revenues and related expenses are always matched against each other (the matching principle); the result should be recognition of the proper amount of profit or loss in an accounting period” (Accountingtool, 2014). The goal of creating the legitimacy of the income statement is to associate the statement records to the accounting records and to the original confirmation of transactions.
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