Income Statement, Lecture notes of Accounting

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Income Statement

Revenues, Operating Expenses,

Depreciation, and Income Taxes

WHAT IS IT?

Same as Profit and Loss Account

Report of operations summarizing the

revenues, expenses, and income

attributed to a specific period

INCOME STATEMENT

Operating Revenues Purchase Expense Operating Expense Maintenance Expense Depreciation Expense Amortization Expense Taxes Other than Income Taxes Income Taxes Provision for Deferred Income Taxes Total Utility Operating Expenses NET OPERATING INCOME

INCOME STATEMENT

(CONT.)

Net Operating Income

Other Income and Deductions

Interest Charges

NET INCOME

HOW ARE EXPENSES

SHOWN?

Subtotal from Prior Slide

• Access Expense

• Depreciation and Amortization

• Marketing

• Customer Operations

• Executive Planning

• General and Administrative = Total Operating Expenses

8

TOTAL NET INCOME

Operating Revenues

• Operating Expense = Utility Operating Income

• Other Operating Income/Expense

• Operating Taxes

• Non-operating income/expenses

• Non-operating taxes
• Interest and Related Items
• /+ Extraordinary Items

• Non regulated Net Income = Total Net Income

OPERATING REVENUES DETAILS

Monthly Access Charges

Subscription

Airtime

Roaming

Connection and SIM sales

Terminal Equipment

OPERATING REVENUES

Interconnection

Miscellaneous

Repairs etc

DIRECT EXPENSE

Bandwidth

Installation

Recharge Cards

Roaming

Customer Terminal Equipment

Sales Commission

OPERATING EXPENSES

Bad Debts

Salaries and Wages

Legal and Professional

Outsourcing

Public Relations

Lease

Rent

OPERATING REVENUES

Uncollectibles l What determines if an account is uncollectible? l What attempts are made to recover the funds? l What is the actual write-off for the year, versus the amount being accrued for uncollectible revenues? l Is the pattern of uncollectibles stable or unusual?

OPERATING EXPENSE

Pensions l Generally based on actuarial determinations of the required funding needs. l Accounting standards require that they be accounted for on an accrual rather than on a cash basis. l Cost of employee’s pension is recognized over that employee’s approximate service life, rather than based on the amount the employer decides to contribute to that plan for any particular period. l Requires immediate recognition of a liability when the accumulated benefit obligation exceeds the fair value of the plan assets.

DEPRECIATION

Estimated Useful Life

l Physical Deterioration l Obsolescence

Salvage Value

Cost of Removal

DEPRECIATION

Straight Line Methods l Spread Evenly Over the Life of the Asset l Based Solely on Use (and not time)

Accelerated Methods l Front end loaded so that most of the depreciation is recorded in the earlier years of the asset

Other l Example: tied to the debt payments associated with the asset