Name: Desiree A.

Galleto BSA_2

1. Explain the following statement: “While the statement of

financial position can be thought of as a snapshot of a firm’s
financial position at a point in time, the income statement
reports on operations over a period of time.”

ANSWER:
Income statements include the company’s income and
expenses in their operations over a period of time, it means that it
could be a month, quarter, a year-to-date period or a calendar or
fiscal year. While the balance sheet or the statement of a financial
statement is the overview of a company's assets, liabilities, and
equity at a point in time because it only gives us a snapshot in terms
of what a company owns, owes and equity after the flows of income
and expenses.

2. Arrange and explain the following income statement items so

they are in proper order of an income statement:
Taxes
Gross Profit
Interest Expense
Depreciation Expense
Selling and administrative Expense
Sales
Sales Discount
Cost of Goods sold
Purchases
Purchase Discount
ANSWER:
The arrangements of the given items in the income statement are the
following:
Sales
Sales Discount
Cost of Goods sold
Purchases
Purchase Discount
Gross Profit
Interest Expense
Depreciation Expense
Selling and administrative Expense
Taxes

In the statement of comprehensive income or the income

statement, the first item in line is the net sales revenue (sales less
sales discount). The answer will be deducted to the cost of goods
sold (purchases less purchases discount). The difference between
the net sales revenue and the cost of goods sold will be our gross
profit. After getting the gross profit, you will less the expenses which
are based on the given, it includes Interest expense, Depreciation
Expense, and Selling and administrative Expense. Its total is what we
called income before tax. The last step is you need to get the
difference between income before tax and the taxes which will lead
you to the net income.