Question

What is "RESIDUAL INCOME AND ACCOUNTING ADJUSTMENTS "

Answer 1

residual income and accounting adjustment

following is the definition of residual income and its accounting adjustment

Residual income is the amount of income that an individual has after all personal debts and expenses, including a mortgage, have been paid.

Residual income (RI) is a managerial accounting measurement used to assess and compare the relative success of business units. The basic formula for calculating residual income is to multiply operating assets by the cost of capital, and then subtract this value from operating income. By adjusting income by the cost of capital, RI can provide insight into the rate of return on invested assets. For example, if two business units have similar profitability, but one requires a substantially higher amount of assets, the RI for that unit will be far lower because more assets were required to produce less income.