Money vocabulary business tech class number 20000
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THE INCOME STATEMENT
- 1. THE INCOME STATEMENT
- 2. Authored by Dr. Meera Sharma
- 3. TABLE OF CONTENTS THE INCOME STATEMENT REALIZATION REVENUES ACCRUAL EXPENSES MATCHING NET INCOME CONSISTENCY ACCOUNTING CONCEPTS INCOME STATEMENT FORMAT CONSERVATISM TEST YOUR CONCEPTS
- 4. THE INCOME STATEMENT REVENUES INFLOWS OF ASSETS THAT RESULT FROM THE CASH OR CREDIT SALES OF GOODS AND SERVICES TO CUSTOMERS EXPENSES OUTFLOWS OF RESOURCES USED TO GENERATE REVENUES INCOME OR PROFIT AMOUNT BY WHICH REVENUES EXCEED EXPENSES
- 5. REVENUES REVENUES INFLOWS OF ASSETS FROM SALES OF GOODS AND SERVICES CASH INFLOWS WHEN SALES ARE MADE IN CASH RECEIVABLES IN CASE SALES ARE MADE ON CREDIT
- 6. REVENUES REVENUES MAY NOT EQUAL CASH RECEIVED BECAUSE SALES MAY HAVE BEEN MADE PARTLY ON CREDIT
- 7. EXPENSES EXPENSES OUTFLOWS OF RESOURCES TO GENERATE THE GOODS AND SERVICES SOLD CASH RESOURCES ARE USED IN CASE THE EXPENSES ARE PAID IN CASH PAYABLES ARE GENERATED WHEN EXPENSES ARE PURCHASED ON CREDIT
- 8. EXPENSES EXPENSES MAY NOT EQUAL CASH DISBURSED BECAUSE PART PAYMENT FOR THEM MIGHT HAVE BEEN MADE ON CREDIT
- 9. EXPENSES EXPENSES MAY NOT BE EQUAL TO COST INCURRED BECAUSE COSTS MAY HAVE BEEN INCURRED FOR GOODS AND SERVICES NOT YET SOLD COSTS INCURRED REFLECT ON THE INCOME STATEMENT AS EXPENSES ONLY WHEN THE GOODS OR SERVICES GENERATED BY THEM ARE SOLD
- 10. NET INCOME NET INCOME/LOSS NOT THE SAME AS INCREASE OR DECREASE IN CASH
- 11. ACCOUNTING CONCEPTS BASIC ACCOUNTING CONCEPTS USED IN PREPARATION OF THE INCOME STATEMENT CONSERVATISM REALIZATION ACCRUAL MATCHING CONSISTENCY
- 12. CONSERVATISM CONSERVATISM ANTICIPATE NO PROFITS ANTICIPATE ALL LOSSES RECOGNIZE REVENUES WHEN REASONABLY CERTAIN RECOGNIZE EXPENSES WHEN REASONABLY POSSIBLE
- 13. REALIZATION REVENUE RECOGNITION THE AMOUNT OF REVENUE RECOGNIZED IS THE AMOUNT THAT IS REASONABLY CERTAIN TO BE REALIZED, FOR EXAMPLE REVENUE IS ADJUSTED FOR ESTIMATED BAD DEBTS ON CREDIT SALES
- 14. ACCRUAL REVENUE IS RECOGNISED ON DELIVERY OF PRODUCT OR PERFORMANCE OF SERVICE WHEN EARNED OR ACCRUED
- 15. ACCRUAL PAYMENT RECEIVED PRIOR TO DELIVERY OF PRODUCT OR PERFORMANCE OF SERVICE IS AN ADVANCE OR UNEARNED REVENUE SUCH AN ADVANCE REPRESENTS A LIABILITY AND IS NOT RECOGNIZED AS REVENUE TILL THE GOODS ARE DELIVERED OR SERVICE IS PERFORMED
- 16. ACCRUAL REVENUE RECOGNITION REVENUE IS RECOGNIZED WHEN IT HAS BEEN EARNED (ACCRUED), NOT NECESSARILY WHEN IT IS PAID OR IS DUE TO BE PAID, FOR EXAMPLE, INTEREST EARNED ON LOAN BUT NOT YET DUE FOR PAYMENT
- 17. ACCRUAL 2022 2023 PRODUCT IS DELIVERED / SERVICE PERFORMED CUSTOMER PAYS FOR PRODUCT OR SERVICE IN CASH INCOME STATEMENT BALANCE SHEET INCOME STATEMENT BALANCE SHEET INCREASE IN CASH INCREASE IN UNEARNED REVENUE INCREASE IN REVENUE DECREASE IN UNEARNED REVENUE
- 18. ACCRUAL 2022 2023 PRODUCT DELIVERED OR SERVICE PERFORMED CASH PAYMENT FOR PRODUCT/ SERVICE INCOME STATEMENT INCOME STATEMENT BALANCE SHEET BALANCE SHEET INCREASE IN ACCOUNTS RECEIVABLE INCREASE IN REVENUE INCREASE IN CASH DECREASE IN ACCOUNTS RECEIVABLE
- 19. MATCHING REVENUE RECOGNIZED FIRST AND EXPENSES MATCHED TO REVENUE EXPENSES ARE COSTS OF GOODS SOLD OR COSTS OF SERVICES PERFORMED COSTS OF GOODS NOT YET SOLD OR SERVICES NOT YET PERFORMED ARE NOT EXPENSES
- 20. MATCHING COSTS THAT ARE NOT MATCHED TO REVENUES BUT ASSOCIATED WITH ACTIVITES OF CURRENT ACCOUNTING PERIOD ARE EXPENSES OF THE CURRENT ACCOUNTING PERIOD FOR EXAMPLE ADMINISTRATIVE EXPENSES, SELLING AND MARKETING EXPENSES SUCH COSTS ARE CALLED PERIOD COSTS
- 21. MATCHING COSTS THAT HAVE BEEN INCURRED BUT CANNOT BE ASSOCIATED WITH REVENUES OF FUTURE PERIODS ARE EXPENSES OF THE CURRENT PERIOD FOR EXAMPLE DAMAGED GOODS
- 22. MATCHING IN SUMMARY, CRITERIA FOR EXPENSE RECOGNITION ARE COSTS MATCHED TO REVENUES OF THE ACCOUNTING PERIOD COSTS ASSOCIATED WITH ACTIVITES OF THE ACCOUNTING PERIOD COSTS THAT CANNOT BE ASSOCIATED WITH FUTURE REVENUES
- 23. CONSISTENCY ONCE AN ENTITY HAS DECIDED ON AN ACCOUNTING METHOD IT SHOULD CONSISTENTLY USE THE SAME FOR ALL SUBSEQUENT TIME PERIODS
- 24. INCOME STATEMENT FORMAT GROSS SALES LESS SALES RETURNS AND SALES DISCOUNTS NET SALES LESS COST OF GOODS SOLD GROSS INCOME LESS OTHER EXPENSES INCOME BEFORE TAX LESS TAX NET INCOME
- 25. TEST YOUR CONCEPTS Which of these represent revenue and expenses in June ? Received orders for goods totaling Rs.25,000 to be delivered in July Office staff salary Rs.9,000 for June
- 26. TEST YOUR CONCEPTS Answer Office staff salary Rs.9,000 is an expense for June
- 27. TEST YOUR CONCEPTS Which of these represent revenue and expenses in June ? Products in inventory costing Rs.1,250 were found to be obsolete Sold goods with a cost of Rs.20,000 in June
- 28. TEST YOUR CONCEPTS Answer Obsolete products in inventory costing Rs.1,250 are expenses for June Rs.20,000 is cost of goods sold in June
- 29. TEST YOUR CONCEPTS Which of these represent revenue and expenses in June ? Paid Rs.500 for print advertising in June Purchased additional inventory for Rs.15,000
- 30. TEST YOUR CONCEPTS Answer Rs.500 is advertising expense in June
