Using Supplementary Data to Interpret Reported Income.

Abstract The article highlights that the nature of the income report has never been set forth clearly by accountants but there seems to be an assumption that its basic nature is that of a report on certain of the activities of a business entity. In accordance with this view, the detailed presentation in the income statement of the expenses of the firm may be considered a procedure, which reveals the activities of the firm and to some degree, provides a basis for estimating the efficiency with which they were performed. However, this apparent endeavor of accountants to reveal activity has failed to provide for an itemization of those activities represented by the income of the firm. As a result, an investor, attempting to evaluate the activities of a firm by a study of income reports, might gather some information by an examination of the expenses of the firm but would remain largely uninformed as to how and in what manner the income was provided. It is the purpose of this paper to examine means and methods by which the nature of the source of the reported income of a firm may be revealed, as well as to review the nature of some of the expense items.