1. Generally accepted accounting principles usually require the use of accrual accounting to “fairly present” income. If the cash receipts and disbursements method of accounting will “clearly reflect” taxable income, why does this method not usually also “fairly present” income?
2. State some of the more serious problems encountered in seeking to achieve the ideal measurement of periodic net income. Explain what accountants do as a practical alternative.
3. What is meant by the terms elements and items as they relate to the income statement? Why might items have to be disclosed in the income statement?
4. What are the three ways that other comprehensive income may be displayed (reported)?
5. How should the disposal of a component of a business be disclosed in the income statement?