🎥+✏️Income Statement Content, Format & Elements 🟢

Responses

1. 

   Grace 15 October 2023

   When listing the components within selling expense and administrative expense, is there a certain order in which they should be listed in? For example, in the video, the selling expenses are listed in the order of sales commissions, depreciation of sales equipment, and delivery expense. Are these listed in a specific order?

   1. 

      Grace 15 October 2023

      Also, for the “other revenues and gains” section and the “other expenses and losses” section, are the components within those sections to be listed in any specific order, or are they just listed in no specific order? For example, in the video, under “other revenues and gains” the components are listed in the order of gain on the sale of warehouse followed by rent revenue. Is there a specific order to this?

      1. 

         Mansour Farhat 16 October 2023

         GAAP does not require any specific order.

2. 

   Mousumi Munni 2 January 2024

   Hello Professor, We need a book.

   1. 

      Deleted User 3 January 2024

      Hello Mousumi,

      Unfortunately, we do not offer books for our content. All our lectures are through digital videos and available on our website.

      Farhat Lectures support team

3. 

   Derrick Chase 4 January 2024

   I have a question pertaining to the other revenue and gains. In the other revenue and gains, it has rent revenue listed as other revenue. Would rent revenue always be classified as other revenues or would it depend upon the type of business? For example, if I was renting condominium units to renters, would rent revenue then go into that first component of the income statement where sales revenue currently is?

   1. 

      Mansour Farhat 4 January 2024

      Indeed Derrick.
      The classification of rent revenue on an income statement can vary depending on the nature of the business and its primary operations. Generally, the categorization is guided by how central the rent revenue is to the core business activities of the company:

      Primary Business Activity: If renting out property (like condominium units) is the main business activity, then rent revenue is typically classified as operating revenue, similar to sales revenue in a retail business. In this case, rent revenue would appear in the top section of the income statement, where it’s considered part of the core business operations.

      Secondary or Incidental Activity: If the business’s main operation is not property rental (e.g., a manufacturing company that also owns and rents out a property), then the rent revenue is often classified under ‘Other Revenue’ or ‘Non-Operating Revenue.’ This category is usually separate from the main revenue lines that reflect the business’s primary activities.

4. 

   Nada Hazeem 8 February 2024

   In the second 13:49 why the non operating expenses are listed under the credit side? while the operating expenses are listed under the debit side? I thought we always list expenses under debit and revenues under credi. Thanks

   1. 

      Mansour Farhat 9 February 2024

      Hi Nada,

      there is no debit or credit side for this income statement. It is a list of the number. I will be redoing this lecture.

5. 

   Fariz Fataliyev 22 February 2024

   Hi Professor

   A quick question for you on the depreciation component. In Uworld and Becker CPA books, the depreciation is presented as a standalone item separated from selling and administrative expense categories while in the lecture above it is shown 2 times: as a part of selling as well as as a part of admin expense categories.
   How should it really be presented as per GAAP?

   1. 

      Deleted User 24 February 2024

      Hello Fariz,

      Depending on the asset being depreciated, depreciation expenses may be classified as a general, administrative, or selling (marketing) expense.

      According to GAAP, they may be presented separately on the income statement or disclosed in the financial statements.

      Farhat Lectures Support Team

6. 

   Richard Parchment 1 January 2025

   Using your example starting at minute 5:00, sale of truck for more than cost resulting in gain, how does that “gain” differ from (according to the Becker text) “income or loss… [that are] unusual or infrequent…reported separately as part of income from continuing operations”. Put another way, what is the difference between the gain (in your example) and unusual and unfrequent income or loss that is reported as income from continuing operations?

   1. 

      Maroun, CPA 3 January 2025

      Hello Richard,

      There is no difference. The gain in the example is infrequent and therefore is reported separately as part of income from continuing operations because it is nonoperating income.

      I hope this helps!

7. 

   Richard Parchment 1 January 2025

   Is the “Loss from Sale of Investment”, typically a realized or unrealized loss?

   1. 

      Maroun, CPA 4 January 2025

      Hello Richard,

      A “Loss from Sale of Investment,” typically reported under Other Expenses and Losses on the income statement, is a realized loss. This means the loss arises when the investment is actually sold for an amount less than its carrying value or purchase cost. It reflects a completed transaction, where the loss is no longer hypothetical but has occurred as a result of the sale.

      In contrast, an unrealized loss occurs when the market value of an investment declines but the investment has not been sold. Unrealized losses are generally not reported on the income statement unless the investment is accounted for as a trading security (under fair value accounting) or there is a permanent impairment.

      I hope this helps!

8. 

   Jiwoong Baek 22 June 2025

   Does the other rev/exp are same as non-operating rev/exp?

   1. 

      Maroun, CPA 24 June 2025

      Hello Jiwoong,

      Yes, Other Revenues and Gains and Other Expenses and Losses typically represent the same thing as non-operating revenues and expenses.

      Non-operating items are not part of a company’s main or central operations. They arise from peripheral or incidental activities, such as gains from selling long-term assets (like property, plant, and equipment), interest revenue, interest expense, or losses from sales of investments.

      In the provided income statement, items listed under “Other Revenues and Gains” and “Other Expenses and Losses” are indeed non-operating, because they don’t reflect the core business activities (like sales or production).

      I hope this helps!

9. 

   Adrian Singh 10 September 2025

   Loss on sale of PPE. What value is being used for the asset? The asset was depreciated. Therefore depreciation expense already accounted for as operating expense. I am thinking that the value of the asset will be after depreciation. In this case a loss on sale should be below the value after depreciation.

   1. 

      Maroun, CPA 12 September 2025

      Hi Adrian,

      In order to better assist you, could you please provide the exact timestamp (mm: ss) you’re referring to?

10. 

    Harikrishna Patel 26 July 2026

    Hello

    your multistep income statement shows a line item as income before income tax and you have made a note in Red that it is EBT. is EBT the same as income from continuing Operations. If so what is the difference between EBIT and Income from Continuing Operations. Becker mentions Income from continuing operations as the sum of Operating income plus Non-operating income.

    1. 

       Maroun, CPA 27 July 2026

       Hi Harikrishna,

       EBT means earnings before tax and corresponds to the line “Income before income tax” in the slide. More precisely, it is income from continuing operations before income tax. It is not the same as income from continuing operations after tax. Financial statement presentation distinguishes income before tax, income tax expense, income from continuing operations, discontinued operations, and net income.

       Using the amounts in the example:
       Operating income = $18,690
       $18,690 + $10,000 + $17,230 − $5,000 = $40,920 EBIT
       $40,920 − $1,860 interest expense = $39,060 EBT
       $39,060 − $8,203 income tax = $30,857 income from continuing operations

       Because there are no discontinued operations in this example, the $30,857 income from continuing operations is also net income.

       The difference is that EBIT is before both interest and taxes, whereas EBT is after interest but before taxes. EBIT is also not necessarily the same as operating income because EBIT may include nonoperating gains, revenues, expenses, and losses.

       Becker’s formula should be interpreted carefully: operating income plus net nonoperating income gives income from continuing operations before tax. Income tax must then be deducted to arrive at income from continuing operations, which is shown after tax.

       Hope this helps!