Lecture 5 Income Statement 1

Lecture 5 Income Statement 1 - Income Statement (I) ACCT...

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1 Income Statement (I) ACCT 410 Accounting for Non-Business Majors Fall 2008 Professor Jieying Zhang Leventhal School of Accounting University of Southern California Sep. 9, 2008
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Income Statement (I) Learning objective Understand when to recognize revenues and expenses Understand why the accrual method may be a better measure of performance. Be familiar with the format of the income statement
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Income Statement Net Income = Revenues /Gains – Expenses /Losses Revenues : Net assets created through performing services or selling goods. Expenses : Net assets consumed from performing services or selling goods. Revenues and expenses are generated from a firm’s primary operating activities, whereas gains and losses relate to peripheral or non-operating activities. Gains/losses from selling marketable securities
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Cash Accounting Cash accounting : Revenues and expenses are simply recognized when cash is received or cash is paid. Measures performance by comparing the cash inflows of a certain time period to the cash outflows of that period (e.g., cash flow from operations). What are the drawbacks?
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Accrual accounting: Measures performance by comparing revenues with expenses. Revenues are recorded when products are sold and services are preformed, and not necessarily when cash is collected. All the related expenses are matched against these revenues, regardless of the outflow of cash. Records events that have cash consequences for an enterprise, but does not
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This note was uploaded on 04/11/2009 for the course ACCT 410x taught by Professor Bonner during the Fall '06 term at USC.

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Lecture 5 Income Statement 1 - Income Statement (I) ACCT...

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