The classification by source can be divided into three:
a. Income statement or Statement of Comprehensive Income (SOCI)
b. Statement of Financial Position (SOFIP)
c. Mixed (i.e. combination of income statement and SOFIP)
Income Statement or Statement of Comprehensive Income (SOCI)
The income statement, which is also called the Statement of Comprehensive Income, is one of the main financial statement, along with the balance sheet, the statement of cash flows; and the statement of stockholder’s equity. The income statement is also referred to as the profit and loss statement of income, and the statement of operations. The income statement gives the financial reports of the revenues, gains or profits, expenses, losses. Net income and other totals per period of time shown in the heading of the statement. In the case where the company’s stock is publicly traded, its earnings per share must appear on the face of the income statement. The income statement is very important because it shows the profitability of a company i.e. the financial health of the organization during the time interval specified. This period of time specified that the statement covers is chosen by the organization and can vary overtime.
As it has always been a point of concern that people pay attention to the profitability of a company and this can be as a result of several reasons. For example, let’s picture a company that was not able to operate profitably, the bottom line of the income statement will indicate a Net Loss. Thus, a banker, lender or creditor may be reluctant to extend additional credit to the company. While on the other hand, if a company operates profitably, the bottom line of the income statement will indicate a net profit ...
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...values that differ from the amounts reported on the Balance Sheet.
b. Current Assets: current assets such as cash, accounts receivable, inventory, supplies, prepaid insurance etc. are usually close to the amount reported on the Balance Sheet.
c. Current Liabilities: Current liabilities such as Notes Payable (due within one year), Accounts payable, Wages Payable, Interest Payable, Unearned Revenue etc. are likely to have current values that are close to the amounts that is been reported on the Balance Sheet.
Note: By definition, the current Assets and Current Liabilities are “turning over: at least once a year and as a result, the reported amounts are likely to be similar to their current value. The long term Assets and Long Term Liabilities are not “turning over” often and therefore, the amount reported will likely be different from the current value of those items.
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