Current-Period Income Effect- Four Earnings Management Approaches

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  Changes in the Income Statement (which is the report that lists the nominal transactions over a specified period of time) effect the Balance Sheet by modifying retained earnings through net income (increase in retained earnings) or a loss (decrease in

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  For example, when an accountant records an accrual for Payroll in the current period, they payroll may not be paid until after the close of the period.

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  "Cumulative effect is the difference in prior years' income between the newly adopted and prior accounting method. Under this approach, the effect of the change on prior years' income appears only in the current-year income statement.

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  The statement of retained earnings is a very short financial statement that contains the beginning balance of the retained earnings account, the current year's net income, and the current year's dividends.

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  effect as an adjustment to retained earnings.

• This post addresses adjusting and closing entries.

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  Please note that liabilities payable in one year period like account payable and note payable are current liabilities. Mortgage is a long term liability. 5.

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  retained earnings By preparing income statement, it is possible to ascertain whether the company has incurred profit or loss for the particular financial period.