Question 1. Explain how the results that are determined on the income statement are related to the shareholder's equity on the balance sheet.
Question 2. Why are the appropriate accruals and deferrals necessary in determining the true income of a firm?
Question 3. In what sense could we say that the profits of a company are an increase in net assets of a firm?
Question 4. Why is it critical to determine revenue from normal operations of a firm, and non-recurring revenue from non-operating sources?
Question 5. How would inappropriate accruals and deferrals give misleading information on the income statement/balance sheet?
Question 6. In determining income, how might the methods differ for purposes of the SEC, IRS, certification to public (CPAs), or other regulatory agencies?