Final answer:
In order to provide accurate financial information, a company must identify elements to be recognized in income, determine the correct timing for these elements' recognition, and decide where to report them in the income statement.
Step-by-step explanation:
To provide relevant and faithfully represented information about financial performance and income to investors, lenders, and other creditors, a company must follow several critical steps. First, the company must identify the elements that must be recognized in income. This includes various types of revenue, gains, expenses, and losses that the company experiences during its operations.
Next, the company must determine the timing of recognition of income elements. This involves deciding when to record these elements on the financial statements, which is guided by principles such as accrual accounting and the matching principle.
Lastly, the company must decide where to report the elements on the income statement. This involves classifying the elements accordingly as operating or non-operating and ensuring that they are presented in a manner that reflects the company's financial activities accurately.
All of the choices provided are correct steps in the process of financial reporting and are essential for ensuring that the information presented in the income statement is both useful and reliable for decision-making by external parties.