Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Single-step Income Statement

Financial Accounting

4. Merchandising Operations

Single-step Income Statement

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Multiple Choice

On which of the following financial statements is depreciation expense reported as a decrease in net income in a single-step income statement?

Balance Sheet

Income Statement

Statement of Cash Flows

Statement of Retained Earnings

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Understand the concept of depreciation expense: Depreciation expense represents the allocation of the cost of a tangible asset over its useful life. It is recorded as an expense in the financial statements to reflect the reduction in the asset's value due to usage or wear and tear.

Identify the purpose of the Income Statement: The Income Statement is a financial report that shows a company's revenues, expenses, and net income or loss over a specific period. Depreciation expense is reported here as it is part of the operating expenses that reduce net income.

Clarify why depreciation expense is not reported on the Balance Sheet: The Balance Sheet shows the company's financial position at a specific point in time, including assets, liabilities, and equity. While accumulated depreciation (a contra-asset account) is reported on the Balance Sheet, depreciation expense itself is not included here.

Explain why depreciation expense is not reported on the Statement of Cash Flows: The Statement of Cash Flows tracks cash inflows and outflows. Depreciation expense is a non-cash item and is added back to net income in the operating activities section, but it is not directly reported as an expense here.

Discuss why depreciation expense is not reported on the Statement of Retained Earnings: The Statement of Retained Earnings shows changes in retained earnings due to net income and dividends. Depreciation expense indirectly affects retained earnings through its impact on net income, but it is not explicitly reported on this statement.