C1 Chapter 05

C1 Chapter 05 - 5-1Chapter 5Income Measurement andThe Income

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Unformatted text preview: 5-1Chapter 5Income Measurement andThe Income StatementFinancial Accounting 1stCanadian ed. by PNCS-B5-2Revenue Recognition PrincipleRevenue is recognized when earned.More specifically when:Performance achievedAmount measurableCollection assured5-3Applications of Revenue Recognition PrincipleManufactured goods and Merchandise - at the time of salesLong-Term Contracts- over life of projectFranchises- upon substantial performanceCommodities- when readily convertible to cashInstallment Sales- when cash is collectedRent and Interest- continuously when earned5-4Expense RecognitionIncome StatementInventorySuppliesPrepaid assetsPP&EIntangiblesas usedBalance Sheetwhen soldover period they provide benefitsASSETS:EXPENSES:Cost of goods soldSupplies expenseInsurance expenseRent expenseDepreciation expenseAmortization expenseOther expenses (as incurred)5-5Matching Principlee.g. Inventorye.g. buildingse.g. UtilitiesDirectly SimultaneouslyLaterCosts Expire and Become ExpensesMatch Expense w/ RevenuesIndirectlye.g. Sales Commissions5-6Income StatementRevenues$$$Less: expenses($$)Net income$$SingleStep5-7Net Sales Cost of goods sold=Gross profitOperating expenses: Selling expenses General and administrative expenses=Income from operations+/Other revenues and expenses=Income before taxes Income tax expense=Net incomeFourimportantsubtotalsMulti-Step Income Statement5-8...
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This note was uploaded on 10/19/2011 for the course ACCT 2242 taught by Professor Cumming during the Spring '11 term at Dalhousie.

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C1 Chapter 05 - 5-1Chapter 5Income Measurement andThe Income

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