Question

answer

5. Explain the difference between comprehensive income and other comprehensive income. (1/2 pt) 6. What is the relationship between accumulated other comprehensive income (AOCT) and other comprehensive income? Hint: calculate the difference between beginning and ending AOCI. (1/2 pt) 7. In what way is AOCI similar retained earnings, besides the fact that they are both equity accounts? (1/2 pt)

Answer 1

In case of multiple questions being asked, as a rule, only One (1) question can be answered at a time. If no specific question is requested (maximum of 1), the first question is itself only answered.
For solution of to the remaining questions, kindly post them again individually separately.

Q5: Explain the difference between comprehensive income and other comprehensive income.

Solution:

Comprehensive income:

• Constitutes items that form part of normal business activity
• All items of the income statement are considered and Net income is arrived at. This net income is one part of the comprehensive income
• The other part of the comprehensive income is, Other comprehensive income. Meaning, Comprehensive income includes other comprehensive income as well.

Other Comprehensive income:

• This is the income derived from activities that do not form part of the normal business activity.
• As they do not form part of the normal business activity, these are not included in the items of the income statement. Infact, Other Comprehensive income is disclosed separately, immediately below the Net Income of the Income statement
• Another reason why Other comprehensive income does not form part of the normal business activity, is because these gains are not yet realized gains. Meaning, they only represent the gains/ losses that arise as a result of fluctuations in the value of assets held by the company.
• Some of the examples are:
  "Gains and losses from derivative instruments, Unrealized gains and losses from debt securities, Pension or other retirement plan, Foreign currency transactions, Available-for-sale securities unrealized gains and losses"