Asked by Sticky Mochi on Jul 12, 2024
Verified
In an accrual-based transactional approach, net income is typically defined as
A) Revenues - Expenses + Gains + Losses
B) Revenues - Expenses
C) Revenues - Expenses + Gains - Losses
D) increase in net assets from nonowner transactions
Accrual-Based
An accounting method where revenue and expenses are recorded when they are earned or incurred, regardless of when cash transactions occur.
Transactional Approach
An accounting method focusing on the individual transactions and events that have a financial impact on a company, analyzing each separately.
Net Income
The total earnings or profit of a company after subtracting all expenses, taxes, and costs, indicative of the company's financial health over a specific time period.
- Understanding the definitions and importance of net income in accrual-based accounting.
Verified Answer
DD
Dannie DavisJul 19, 2024
Final Answer :
C
Explanation :
Net income in an accrual-based accounting system is calculated as Revenues minus Expenses plus Gains minus Losses. This formula captures all the components that affect a company's profitability during a period, including both operational and non-operational items.
Learning Objectives
- Understanding the definitions and importance of net income in accrual-based accounting.