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What is the difference between operating and nonoperating

Why should caution be exercised in the use of the income figure derived in an income statement?

How should correction of errors be reported in the financial statements?

What is the difference between operating and nonoperating items? And why do we show the difference in the financial statements ?

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Why should caution be exercised in the use of the income figure derived in an income statement?
Net income contains a number of estimates and so the precision is not as it appears. Two competent accountants, both with good intent, can arrive at two different Net Income computations that are both correct and acceptable but differ from each other. For instance, one can use 6 years as the estimated life of the equipment and the other use 7 years. The estimated life can be 6-7 years and the precise life will not be known for 6-7 years. Both accountants have made good faith estimates and correct computations but will have different Net Income.

How should correction of errors be reported in ...

Solution Summary

Your tutorial is 406 words in everyday language suitable for a novice. Examples are given to illustrate operating versus nonoperating items and why net income is not a precise result. No references used.

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