Some lines of the profit and loss statement depend on estimates and forecasts, but the interest cost line is a basic formula. But when accounting for income tax expenses, business can use different accounting methods for part of the cost than to use for calculating taxable income. The assumed amount of taxable income when accounting method used is used for tax returns is calculated. Thereafter, the income tax is fitted based on this assumed taxable income. This is the income tax expense reported in the income statement. This amount is adjusted with the actual amount of income tax owed to the accounting method used for the purpose of income tax. The settlement of two different income tax amounts is provided in the footnote on the income statement.
Net income is something like profits before interest and tax (EBIT) and it varies significantly depending on the accounting method being used to report on sales and expenses Smoothing profit, profit It is a place where you can come to play to operate. Smoothing of profits is a matter of choosing acceptable accounting methods from the list of GAAP and implementing these methods in a reasonable manner from gray in profit and loss management with accounting operations
It is used to measure profits and answers the questions about asking for manager's involvement in determining how to account for how those methods are actually implemented, and our financial reporting Also go. It is therefore important that officers or managers of the company are familiar with how to prepare the company's financial statements. The method of accounting and the method you implement depends on your business. Company methods may fall anywhere in the continuum on either the left or the right of GAAP center.
Part of the income statement, part 2
Of course, profit and cost of sales cost is the two most important components of the profit and loss statement, or at least, they will look first at what people, but the income statement is really the sum of that part Yes, they all need to be carefully, consistently and accurately considered.
In depreciation report, business can use short life method, load most of expenses over the first few years, or long-lived methods, and depreciation over the years for several enterprises The way of reporting is particularly important for them.
One of the more complex elements of the income statement is the line reporting employee pensions and post-retirement benefits. GAAP rules on this expense are complex and some and other estimates by business such as the expected return on fund portfolios secured for these future obligations will affect the amount of recorded costs Give it.
Many products are sold with explicit or implied warranty and warranty. The business must estimate the cost of these future obligations and record this amount as an expense during the same period as the item is sold. We can not really wait until the customer actually returns the product for repair or replacement.
Other operating expenses are reported, and timing when there may be income statements takes into account estimates. Some expenses are also discretionary in nature, which means that it depends on how much management discretion is being spent during the year.
Interest and pre-tax earnings (EBIT) measure the sales revenue of all less expenses on this line. This depends on all decisions made to record sales revenue and expenses, and how the accounting method is implemented.
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