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Lecture 4

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Lecture 4 Accounting - The University of Queensland Course : Master of Commerce / Accounting Financial Accounting . An Integrated Approach- Third Eddtion.

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									Readings T&G Chapter 4 (revise); 5; 12 Lecture Problems: P5.34

Topic 4: Revenue and Expense recognition in Accrual Accounting (Accounting Cycle Completed)
1

Learning Objectives
 Be able to explain the purpose of accrual accounting       

adjustments Be able to prepare adjusting entries for balance-day (accural) adjustments To prepare prepare financial statements from an adjusted trial balance Understand why temporary ledger accounts are closed at end of period Prepare closing entries and enter these in the accounts Understand the concept of Contra Accounts Understand the definition and recognition criteria for Income and Expenses? Understand the basic presentation requirements for2 the Income Statement

The Accounting Cycle - Recall
1
Last Week

SOURCE DOCUMENTS – Transaction Analysis 2 3 JOURNALS LEDGERS
During the accounting period

4 TRIAL BALANCE 5 6
This Week

ADJUSTING JOURNAL ENTRIES CLOSING JOURNAL ENTRIES POST-CLOSING TRIAL BALANCE 8 FINANCIAL STATEMENTS
3

End of accounting period

7

Basic Categories of Journal Entries
 Basic



induced by a transaction

 Adjusting 

year-end adjustments why? timing of cash flow versus timing of revenue and expense recognition  close I/S accounts to equity why? I/S accounts are “temporary” accounts

 Closing

4

Step 5: Balance Day Adjustments


At the end of each accounting period it is necessary to adjust the revenue and expense accounts to reflect:  Expenses incurred but not yet paid  Cash received from customers before the goods/services have been provided/performed  The using up of assets



This process reflects the principle of accrual accounting and the concept of matching and results from the accounting period assumption
 

recording revenue in the period in which it is „earned‟ recording expenses in the period in which they have been „incurred‟.



Accrual adjustments DO NOT involve cash!
5

Step 5: Balance Day Adjustments
1. 2.

Prepayments - Expiration of assets


Occurs when an asset has been consumed during the period. [prepayments, office supplies, depreciation] Occurs when the entity has received payment for a service but has not performed the service and therefore is not entitled to recognise the revenue. [unearned revenue/revenue received in advance]

Prepayment (Unearned) revenues


3.

Accrual of Unrecorded expenses


Occurs when an expense has been incurred but has not yet been paid [wages payable, electricity payable, accrued expenses]
Occurs when the entity has earned the revenue by providing the service/or passing of the accounting period (i.e. interest revenue for a period) but has not received payment for the revenue. [revenue receivable]
6

4.

Accrual of Unrecorded revenues


Adjusting entries
 made necessary by period assumption  four main types of adjusting entries:
Accruals Accrued revenues (an asset) Prepayments (Deferrals) Prepaid or Unearned revenues (a liability) Prepayments (an asset)
7

Revenues

Expenses

Accrued expenses (a liability)

1. Prepayments Expiration of assets
Examples:
Prepayments


Prepaid 12 months insurance but only 1 month relates to this financial year.  Prepaid Insurance Prepaid 6 months rent but only 2 months relates to this financial year.  Prepaid rent Purchased office supplies (stationery) for the year and at the end of the year have supplies remaining.






record the expense for office supplies consumed
8

Prepayments - Expiration of assets (1)
1 May 2003 pay $1,200 insurance premium covering 12 months from 1 May. DR CR
1 May 2003
Dr. Cr. Prepayments (A) Cash (to record payment of insurance) $1,200 $1,200

Accrual Adjustment @ 30 June 2003 to show the consumption of the asset – Prepayment by recognising 2 months expense allocated to this accounting period
Dr. Cr. Insurance expense (E) Prepayments (A) (to adjust for insurance expense for the period) $200
$200

9

Prepayments - Expiration of assets (2)
Purchase office supplies of $1,000 on 1 June. At 30 June $300 of the office supplies remained, i.e. $700 had been consumed.  Office supplies expense for $700  Office supplies asset has a remaining balance of $300 DR CR
1 June
Dr. Cr. Office supplies (A) Cash (to record purchase of office supplies) $1,000
$1,000

Accrual Adjustment @ 30 June to show the consumption of the asset.
Dr. Cr. Office supplies expense (E) Office supplies (A) (to record the supplies expense for the period) $700

$700
10

2. Prepaid Revenue/Unearned revenue
On 1 June, received a deposit of $100,000 for service to be provided in the next accounting period.
   

Cash received but services not provided Therefore can not recognise the revenue Obligation to provide a service (or return the money) This creates a liability – Unearned Revenue

DR

CR

When cash received 1 June:
Dr. Cr. Cash Revenue $100,000 $100,000

Accrual Adjustment @ 30 June to reflect that unearned revenue:
Dr. Cr. Dr. Cr. Revenue Unearned Revenue (L) Unearned Revenue (L) Revenue $100,000 $100,000 $100,000 $100,000
11

Next financial period when service is provided:

3. Accrued expenses
Example of Wages owing at year end for $100,000.
  

The wages have not been paid – therefore no cash The expense needs to be recognised this period This creates a liability – Accrued expenses (or accrued wages).

Accrual adjustment @ 30 June to reflect unpaid wages that have been incurred by not paid.
Dr Cr Wages expense (E) Accrued Expenses (L) 100,000 100,000

When wages paid in the next period:
Dr Cr Accrued Expense (L) Cash 100,000 100,000
12

(This applies to all accrued expenses)

4. Revenue Receivable (Accrued Revenue)
Example of Bank interest of $50 000 owed to the business at year end:  No cash received  Revenue not yet recognised but needs to be recognised as has been earned  The revenue is a “receivable” therefore an asset

Accrual adjustment @ 30 June
Dr Interest Receivable (A) Cr Interest revenue (R) 50,000 50,000

When interest is received in the next financial accounting period:
Dr Cash Cr Interest Receivable (A)
Other examples:- Rent receivable, Commission receivable
13

50,000 50,000

Exercises 1
Prepare adjusting entries to reflect the following transactions for Martin Pty Ltd as at 30 June 2005.
A A Salary bonus due to the motel manager totalling $12,000 for the financial year has not yet been recorded .

B

On 1 October 2004 a comprehensive insurance policy covering building and contents was taken out for the year ended 30 September 2005, the annual premium of $2,400 being paid on 1 November 2004.
Interest on investments amounting to $450 is due but has not yet received. In may, commission of $360 had been received in advance for the six months ending 31 October 2005. The business has performed the required services for May and June. Accrued electricity charges were $92 and telephone charges were $102.
14

C D

E

Exercises 1 - Solution
Details
A Salaries Expense Accrued Expenses (recognition of salaries owing at year end)

Dr
12,000

Cr

12,000

B Insurance Expense Prepayments (recognition of 9/12 x 2400 prepaid insurance expired)

1,800 1,800

C Interest Receivable Interest Revenue (recognition of interest earned but not received)

450 450
15

Exercises 1 - Solution
Details D Unearned revenue Commission revenue (recognition of commission earned–2/6 x 360) E Electricity expense Telephone expense Accrued expenses (recognition of expenses incurred at end of period) 92 102 194 Dr 120 120 Cr

16

Lecture Problem: P5.34
Status Cymbal:
 Prepare journal entries  Prepare adjusting entries

17

Adjusted Trial Balance
 Once adjusting entries have been prepared

and posted to the ledgers, an adjusted trial balance is drawn up.
 This is the basis for preparing the financial

statements.
 Also a test to see if account remain in balance

after the adjusting entries.
 Accountants use the trial balance to look for

errors!

18

Step 6. Closing entries
 To facilitate the preparation of the financial statements

and to prepare the accounting records to begin the next period, a company may prepare closing entries.
 Closing entries formally transfer the balances of the

income and expense accounts to a profit and loss summary, then to retained profits. This is the „link‟ between the two financial statements.
 Closing entries also reset the income and expense

accounts balance to zero to begin recording these items for the next accounting period.
19

Closing entries
 Income and expenses are temporary accounts.  Temporary accounts are closed at the end of an accounting period.  Income & Expense closed to the P&L Summary.  P&L Summary a/c then closed to Retained Profits.  Income here includes both revenue and gains.  Assets, Liabilities and Shareholders‟ equity are

permanent accounts.


Permanent accounts are not closed. Their balance is carried forward to the next accounting period.
20

Closing entries - process
 Close all income a/c to P&L Summary a/c DR Revenue xxxxx

CR

P&L Summary a/c (to close revenue to P&L Summary)

xxxx

 Close all expense a/c to P&L Summary a/c DR P&L Summary a/c xxxxx

CR

Expense a/c (to close expenses to P&L summary)

xxxx

 Close P&L Summary a/c to RETAINED PROFITS DR P&L Summary a/c xxxxx

CR

Retained profits (to close profit to retained profits)

xxxx
21

Closing entries – revenue
Sales Revenue 100 000 100 000 Interest Revenue 5 000 5 000

P & L Summary 100 000 5 000
22

Closing entries – expenses
Wages Expense 10 000 10 000 COGS 30 000 30 000 Advertising Exp 8 000 8 000

P & L Summary 10 000 100 000 30 000 5 000 8 000
23

Closing entries – P & L summary
P & L Summary 10 000 100 000 30 000 5 000 8 000 57 000 105 000 105 000 Retained Profits o/b 30 000 57 000

24

Exercise 2
Based on the following adjusted trial balance, prepare the required closing journal entries.
Accounts Cash at bank Accounts receivable Prepaid insurance Office supplies inventory Land Building Accumulated depreciation - building Office Equipment Accumulated depreciation - office equipment Accounts payable Salaries payable 9,600 100 4,600 990 DR 43,558 5,800 920 540 10,000 62,000 200 CR

Commissions payable
Interest payable

4,800
600

Accrued expenses Unearned appraisal fee Mortgage payable Share capital Retained profits Commission revenue Appraisal fee revenue Service fee revenue Salary expense Commission expense Telephone expense Advertising Insurance Expense Office supplies expense Depreciation - office equipment 2,790 4,800 72 120 40 80 100

210 280 60,000 50,000 9,400 9,600 250 400

Depreciation expense - building
Interest expense Electricity expense

200
600 210 141,430 141,430
26

Exercise 2 - Solution
Details
P&L Summary Salary expense Commission expense Telephone expense Advertising Insurance expense Office supplies expense Depreciation – office furniture Depreciation – building Interest expense Electricity expense (transfer of expense a/c to P&L summary)

Dr
9,012

Cr

2,790 4,800 72 120 40 80 100 200 600 210
27

Exercise 2 - Solution
Details Commission revenue Appraisal fee revenue Service fee revenue P&L Summary (transfer of revenue a/c to P&L summary) Dr 9,600 250 400 10,250 Cr

P&L Summary Retained Profits (transfer of P&L summary to Retained profits. – Rev 10,250 – Exp 9012

1,238 1,238

28

Step 7: Post-Closing Trial Balance
 Once all of the closing entries have been

completed it is now time to prepare a further trial balance to ensure the accounts balance
 Process the same as step 4 so not repeated

here.
 From there it is time to prepare the financial

statements…… Step 8.

29

Exercise 3
 From the trial balance provided in

exercise 2, prepare the:
Income Statement.  Balance Sheet.


30

Income Statement
Smith Pty Ltd Income Statement for the period ended 30 June 2005 $ Sales Commission revenue Appraisal fee revenue Service fee revenue Less Operating Expenses Salary expense Commission expense Telephone expense Advertising Insurance Expense Office supplies expense Depreciation expense - office equipment Depreciation expense - building Interest expense Electricity expense Net Profit before tax $ 9,600 250 400 10,250 2,790 4,800 72 120 40 80 100 200 600 210

9,012 1,238

31

Balance Sheet

Smith Pty Ltd Balance Sheet as at 30 June 2005 ASSETS $ Current Cash at bank 43,558 Accounts receivable 5,800 Prepaid insurance 920 Office supplies inventory 540 Non-Current Land 10,000 Building 62,000 Accum. Depr - building (200) Office Equipment 9,600 Accum. Dep - office equipment (100) Total Assets LIABILITIES Current Accounts payable 4,600 Salaries payable 990 Commissions payable 4,800 Interest payable 600 Accrued expenses 210 Unearned appraisal fee 280 Non-Current Mortage payable Total Liabilities Net Assets Represented by Shareholders Equity Share Capital Retained profits Total Shareholders Equity

$

50,818

81,300 132,118

11,480 60,000 71,480 60,638

50,000 10,638 60,638
32

Contra accounts
 

Used mainly with asset accounts. Only have meaning in conjunction with the control account to which they are matched.

Control a/c Contra a/c Accounts receivable  Allowance for doubtful debts Property, plant and equipment  Accumulated depreciation Intangible Assets  Accumulated amortisation

33

Contra accounts – what do they tell us?


Allowance for doubtful debts
 the estimated accounts receivable that is doubtful in their collection  indicates collection problems  indicates the net realisable value of receivables



Accumulated depreciation  likely ages of PPE  how much of the economic benefit has been consumed.  Does not tell us about VALUE!
34

Allowance for doubtful debts


There are various methods of accounting for bad and doubtful debts.
The company makes an allowance at year end for potential bad debts (estimate).

Allowance method.


Dr Cr


Bad or Doubtful Debts Expenses x Allowance for Doubtful Debts

x

In subsequent periods when the debt is deemed uncollectible, it is written off. Given that the allowance has been made in a prior period (the expense has previously been recognised), then the journal would be: Dr Allowance for Doubtful Debts x

Cr

Accounts Receivable

x

35

Allowance for doubtful debts
Direct write-off

The company may however determine an account to be uncollectible and record a direct write-off.
Dr Cr Bad Debts Expense Accounts Receivable x x

This essentially presumes that no previous allowance has been made and hence no expense previously recorded.
36

Example
At 1.7.03: The extract from the Balance Sheet indicated: Accounts Receivable Less Allowance for doubtful debts Accounts Receivable (net) $100,000 $2,000 $98,000

37

Example
 A customer who owes $1,500 has gone bankrupt. An

allowance had been previously made for this customer.
Dr. Allowance for doubtful debts Cr. Accounts Receivable Balance sheet Accounts Receivable Less Allowance for doubtful debts Accounts Receivable (net) $1,500 $1,500 Before $100,000 $2,000 $98,000 After $98,500 500 $98,000

38

Example
 The company decides to increase the allowance for

doubtful debts to $2,500 representing all accounts over 150days. Dr. Doubtful debts expense Cr. Allowance for doubtful debts $2,000 $2,000

[Allowance for doubtful debts is presently $500, therefore needs to increase by $2,000 required]

Balance sheet Accounts Receivable Less Allowance for doubtful debts Accounts Receivable (net)

Before $98,500 $500 $98,000

After $98,500 2,500 $96,000

39

Exercise 3
 At year end, the accounts receivable balance is $171,500 and the Allowance

for doubtful debts is $7,000. Bad debts of $350 are to be written off (from existing allowance). Allowance for doubtful debts is to be adjusted to stand at $8,600.

Details Allowance for Doubtful Debts

Dr 350

Cr

Accounts receivable
(to record the write-off of bad debts previously allowed as doubtful) Bad Debts expense Allowance for Doubtful Debts (recognise doubtful debts 8,600 – (7000-350) = 1,950 1,950

350

1,950
40

Terminology
 In practice the terminology for bad and doubtful debts is varied.  The text book tends to use the terms Bad debt expense for both.  The following terms can be used interchangeably (and often are).


For the expense account
  

Bad debts expenses Doubtful debts expense Bad & Doubtful debts expense

For the Contra Asset account  Now called ALLOWANCE FOR DOUBTFUL DEBTS
 students to use this account name


Previously [Pre-IFRS]
 Allowance for Doubtful Debts OR Provision for Doubtful Debts
41

Depreciation
Allocation of the cost of a noncurrent asset to expense over the life of an asset to recognise the consumption of the asset‟s economic value.
 Accumulated depreciation (B/S) shows all depreciation

charged (accumulation) against an asset to date.
 Depreciation expense (P&L) shows this year’s

depreciation allocation only. More on PPE in Topic 6 – various other methods.

42

Depreciation example
Asset costs $100,000 with a life of 5 years and no estimated residual value. Straight line depreciation each year: Dr. Depreciation $20,000 Cr. Accumulated depreciation $20,000 Balance Sheet (for the 3 years) Y1
Asset – at cost Accumulated depreciation Carrying Amount 100,000 20,000 80,000

Y2
100,000 40,000 60,000

Y3
100,000 60,000 40,000
43

Amortisation
Allocation of the cost of a noncurrent intangible asset to expense over its useful life. (Same as depreciation but for
intangible assets.)

 Accumulated amortisation (B/S) shows all amortisation

charged against an asset to date.
 Amortisation expense (P&L) shows this year’s

amortisation allocation only.

44

Amortisation example
Intangible asset acquired is equal to $100,000 and has a finite life of 10 years. Use straight line amortisation each year for intangible asset. Dr. Amortisation expense Cr. Accumulated amortisation $10 000 $10 000

Balance Sheet (for the 3 years)
Intangible Asset – at cost Accumulated Amortisation Intangible asset - net

Y1

Y2
100,000 20,000 80,000

Y3
100,000 30,000 45 70,000

100,000 10,000 90,000

Definition of Income
Income is increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increase in equity, other than those relating to contributions from equity participants.
Framework 70(a)

Encompasses:
 

Revenues Gains
Framework 74-77

Distinction between „revenue‟ & „income‟ - New
46

Definition of Revenue
Revenue is gross inflows of economic benefits during the period that arise in the course of the ordinary activities of an entity when those inflows result in increases in equity, other than increases relating to contributions from equity participants.
AASB118:7

Revenue arising from:
  

The sale of goods The rendering of services The use by others of entity assets yielding interest, royalties and dividends AASB118
47

Example (1)
 A store sells a can of drink for $1.50.
  

Inflow of economic benefits. Increase in assets (cash). Increase in equity (E = A – L).
Revenue recognised

→

48

Example (2)
 Borrow $1 million.
   

Inflow of future economic benefit. Increase in assets (cash). Increase in liabilities (loan). No change in equity.
Not revenue.

→

49

Example (3)
 Cash received from issue of share capital.
   

Inflow of future economic benefit. Increase in assets (cash). Increase in equity however…. Contribution by owners.
Not revenue.

→

50

Definition of Gains
Gains represent other items that meet the definition of income and may or may not arise in the course of the ordinary activities of an entity. Gains represent increase in economic benefits and as such are no different in nature from revenue
Framework 76
  

Gain on disposal of non-current assets Income from revaluation of marketable securities Increase in carrying amount of non-current assets
51

Definition of Expense
Expenses are decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrence of liabilities that result in decreases in equity, other than those relating to distributions to equity participants.
Framework 70(b)

Encompasses:  Expenses that arise in the course of ordinary activities  Losses
52

Example (1)
 Wages paid to a shop assistant.
  

Economic benefits consumed. Decrease in an asset (cash). Decrease in equity (E = A – L).
So we have an expense.

→

53

Example (2)
 Purchase of a machine.
   

Consumption of economic benefits. Decrease in assets (cash). Increase in assets (machine). No change in equity.
Not an expense.

→

54

Example (3)
 Dividends paid.
   

Consumption of future economic benefits Reduction in asset (cash) Decrease in equity (retained profits) However - distribution to owners.
Not an expense.

→

55

Recognition of Income & Expenses
Income is recognised … when ..




An increase in future economic benefit … has arisen The increase can be measured reliably. Framework 92-93

Expenses are recognised … when ..
 

A decrease in future economic benefit … has arisen The decrease can be measured reliably. Framework 94-98

56

AASB 118 Revenue
 Measurement


“Revenue shall be measured at the fair value of

the consideration received or receivable”
(AASB118:9)

 Recognition – Prescribed accounting treatment from

transaction involving:
  

Sales of Goods Rendering Services Interest, Royalties & Dividends

 Extensive examples of revenue recognition are provided

in AASB118.

57

Recognition – Sale of Goods
Revenue from the Sale of Goods is recognised when:
1.

2.

3. 4.

5.

The entity has transferred to the buyer the significant risks and rewards of ownership of the goods; The entity retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; The amount of revenue can be measured reliably; It is probable that the economic benefit associated with the transaction will flow to the entity; and The costs incurred or to be incurred in respect of the transaction can be measured reliably.
58

Timing of Revenue Recognition


What is the earliest point in time in which the criteria for recognition is satisfied?
1.

At point of sale or delivery?
  Free on Board (F.O.B.) Shipping point F.O.B. Destination

2. 3. 4. 5.

During production? At the completion of production? When cash is received? Some point after cash has been received?

59

Recognition – Rendering of Services


Revenue from the rendering of services is recognised by reference to the stage of completion of the transaction at the reporting date when the outcomes of the transaction can be estimated reliably. 1. The amount of revenue can be measured reliably 2. It is probable that the economic benefit associated with the transaction will flow to the entity; 3. The stage of completion of the transaction at the reporting date can be measured reliably; 4. The costs incurred for the transaction and the costs to complete the transaction can be measured reliably.  If the costs cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable.
60

Recognition – Interest, royalties and dividends


Revenue from the use by others of entity assets yielding interest, royalties and dividends is recognised when: 1. It is probable that the economic benefit associated with the transaction will flow to the entity; 2. The amount of revenue can be measured reliably. Revenue is recognised on the following bases:  Interest – effective interest method as set out in AASB 139;  Royalties – the accrual basis, in accordance with the substance of the relevant agreement;  Dividends – when the shareholder‟s right to receive the dividend payment is established.
61



Interest


Interest – „effective interest method‟ as set out in AASB 139;


Effective interest method is a method used to determine the carrying amount of a (financial) asset or (financial) liability by allocating the effective interest income or interest expense evenly over the life of an instrument (effective yield of an instrument).



NB - You will not be required to calculate interest revenue using the effective interest method.
62

Royalties and dividends


Royalties – the accrual basis, in accordance with the substance of the relevant agreement


The contract would assist in determining the substance of the agreement



Dividends – when the shareholder‟s right to receive the dividend payment is established.
 





 

Discretionary and generally do not accrue over time Dividends are generally a decision of the board of directors – they „propose‟ a dividend Final dividends (proposed at the end of the financial year) are (generally) ratified (confirmed) at the AGM by shareholders. Use the same recognition criteria regarding probability and reliability of future economic benefit Usually recognised when proposed by Board We will look at the different accounting treatments for dividends in Topic 8.
63

Format of the Income Statement
Questions you must ask regarding disclosure:
 Mandatory Requirements  What information must be disclosed?  Where is the information to be disclosed?
 

On the face of the Income Statement? Choice to put in the notes?

 Voluntary decision  What information might the company disclosure voluntarily to provide users with relevant information to make decisions?
Income Statement Format prescribed in AASB101


para 84-95
64

 Disclosures also prescribed in AASB118

Information to be presented on the FACE of the income statement
 As a minimum, the face of the income statement shall

include the …following line items…:
   


 

Revenue; Finance costs; Share of profit/loss of associates and joint ventures; Tax expense; Pre-tax gain or loss on disposal of assets of discontinued operations; Profit or loss
AASB101:81

Profit or loss attributable to:
 

minority interest equity holder of parent
AASB101:82
65

Information to be presented either on the face or in the notes
 Additional line items, headings and subtotals shall be presented

on the face of the income statement when such presentation is relevant to an understanding of the entity‟s financial performance [para 83]
 Each material class of income and expense shall be disclosed

separately. [see para 86-87 for guidance here]
 Dividends distributed to shareholders and dividends per share

during the period are to be disclosed on the face of the income statement or the statement changes in equity or in the notes. [para 95]
66

Information to be presented either on the face or in the notes
Expenses  An analysis of expenses using a classification based on either the nature or function (cost of sales method).
 If expenses classified by function shall also disclose

additional information about their nature including depreciation and amortisation expenses, employee benefits expense. AASB101: 88-94

67

Revenue - Disclosure
Principle disclosures relating to Revenues
 Accounting policies adopted in recognising revenue including the

methods adopted to determine the stage of completion of transaction involving rendering of services;  Amount of each significant category of revenue recognised during the period including revenue from:
 


 

sale of goods; the rendering of services; Interest; Royalties; Dividends; and

 The amount of revenue arising from exchanges of goods or

services included in each significant category of revenue
AASB118:35
68

AASB101 – Income Statement

69

AASB101 – Income Statement

70

AASB101 – Income Statement

71

AASB101 – Income Statement

72

Summary
 Can you recall the accounting process and accounting cycle?

   

Prepare adjusting entires  Prepare closing entries  Prepare a post-closing trial balance  Prepare financial statements Do you understand Contra Assets? Can you record allowance for doubtful debts? Can you understand the definition and recognition criteria for Income and Expenses? Do you understand the basic presentation requirements for the Income Statement


Practice will help..  The tutorial question will help develop this fundamental knowledge which will be examined in the mid-semester exam.
 For Next Week:


Topic 5: Current Assets

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