Overall analysis of income statement accounts may bring to light errors, omissions, and inconsistencies not disclosed in the overall analysis of balance sheet accounts. The income statement analysis can best be accomplished by comparing:

Question

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The best way to analyze the income statement accounts is to compare the revenue and expense account totals to the corresponding figures of the preceding years. This comparison allows for the identification of any unusual fluctuations or trends that may indicate errors or inconsistencies. Choice A is incorrect because comparing income statement ratios to balance sheet ratios may not provide a clear picture of the errors and inconsistencies. Choice B is incorrect because comparing revenue and expense account balances to monthly net income may not reveal the long-term issues. Choice C is incorrect because comparing income statement ratios to published industry averages may not take into account the company's unique circumstances.

Overall Analysis of Income Statement Accounts May Bring to Light