Question

What is the presentation order of the major components of an income and retained earnings statement (hint: IDEA)?

Answer 1

The presentation order of the major components of an income and retained earnings statement can be remembered using the acronym IDEA: Income, Deductions, Extraordinary Items, and Adjustments.

Step-by-step explanation:

The presentation order of the major components of an income and retained earnings statement can be remembered using the acronym IDEA:

1. Income: This includes revenue from sales, services, and any other sources.
2. Deductions: These are expenses incurred in the process of generating income, such as wages, rent, utilities, and taxes.
3. Extraordinary Items: These are unique, non-recurring events or transactions that significantly impact the financial performance of a company, such as gains or losses from the sale of assets.
4. Adjustments: These are changes made to prior period financial statements due to errors or accounting changes.

By following this order, you can ensure that the income and retained earnings statement is presented accurately.