Unit3Accrualaccounting1.pptVIP

* Income statement Now that we have completed the worksheet of Henry’s Hardware for the month we can prepare the financial reports The income statement identifies the revenues (and gains if there are any) and expenses of a business for a period, and in doing so, measures the profit for that period. There are different formats for this statement; * Income statement In the income statement businesses that buy and sell inventory disclose: gross profit (毛利) (sales revenue less COGS) net profit (净利) (gross profit + other revenues and gains if there are any - other expenses) larger businesses may classify their other expenses, for example, into financial, selling and administrative groups * BFA103_02 * * “Recognising” revenues When we record an item such as a revenue in our accounting records we say that the item has been “recognised” （被认可的） Revenues cannot be recognised unless: the amount of revenue can be reliably measured it is probable that any future economic benefit associated with the revenue will be received by the business The activity needed to earn the revenue is substantially complete * “Recognising” revenues That still leaves open considerable choice about when to record revenue. Take businesses that provide a service. If each job is relatively short (a doctor seeing a patient for example) then the revenue is said to be earned and so recorded when the job is completed. If each job takes a long time (an engineering firm building a bridge for example) then the revenue might be earned over a number of periods and a percentage of the total revenue could be recorded as each stage of the project is completed. * “Recognising” revenues For businesses that sell inventory it is usual to consider the revenue earned and therefore recorded when the goods are transferred to the buyer. This issue of when to recognise a revenue is a very important one because it can affect the profit of more than period and therefore can affect the decisions of report users. * “Recog