In traditional approach income statement, overheads are charged to product based on predetermined rate rather then based on actual activity.
traditional approach
1. Contribution approach income statement is different from simple income statement in this sense that in contribution margin approach variable costs are deducted from revenues to find out how much any sale of unit of product is contributing towards recovery of fixed cost of product.
limitation about net income approach
no. income statement is a only a statement in financial statements.
projected income statement is the estimated income statement to estimate the future business position.
traditional approach
The traditional income statement organizes costs on the basis of cost behavior
Under the contribution approach (variable costing), all variable expenses (both manufacturing and non-manufacturing) are deducted first from sales to arrive at contribution margin. Fixed costs (both manufacturing and non manufacturing) are deducted from contribution margin to arrive at net income before taxes. Under traditional approach (absorption costing), all the manufacturing costs (both fixed and variable) are deducted from sales to arrive at gross profit (margin). Non-manufacturing (Selling and administrative) costs are then deducted from gross margin to arrive at net income before taxes.
1. Contribution approach income statement is different from simple income statement in this sense that in contribution margin approach variable costs are deducted from revenues to find out how much any sale of unit of product is contributing towards recovery of fixed cost of product.
Generally,there are two approaches to financial statement analysis,one the is the traditional approach where use of ratio analysis is applied and all information for analysis will be gathered from balance sheet and income statement.In recent times trend analysis and common-size statement has been used.The second is the modern approach where both internal and external business environment are taken into consideration.The approach is futuristic as opposed to traditional approach. The financial statement may be also analyzed horizontally or vertically,across industry,in macro(in aggregate manner) and also in the firm either top down or bottom up.
Comparative income statement is same as normal income statement with little addition of that income statement as well from which comparison is required.
Comparative income statement is same as normal income statement with little addition of that income statement as well from which comparison is required.
limitation about net income approach
Following are two catagories of income statement: 1- Single Step Income statement 2- Multy-step income statement
The 3 approaches to national income accounting are the output approach, the income approach and the expenditure approach.
no. income statement is a only a statement in financial statements.
projected income statement is the estimated income statement to estimate the future business position.