ACC1200 Lecture Notes - Lecture 3: Accrual, Financial Statement, Net Profit
WEEK 3 – Income statements and statement of equity
changes
Accounting policies:
General purpose financial statements have format and content specification, but they have
flexibility to assist in preparing reports. Judgement and estimates are used when accounting
reports are prepared
o Depreciation
o Doubtful debts
For profit – revenues exceeding expenses, earning an overall profit
Not for Profit – based on the mandate, the activities that they are allowed to do for
certain purposes
Government – social services like security
Income statements: shows the financial performance of a company in a given time period by
revenue and expenses
o Revenue
o Cost of Goods Sales
o Gross Profit
o Other expenses
o Net Profit
Current modern businesses will have more than financial statements within their report,
just like social and environmental aspects as well.
Income: INCLUDES BOTH REVENUES AND GAINS
Cash vs Accrual Accounting
Cash accounting are transactions that involve cash transactions only, where the transfer of
cash is made between entities.
Accrual accounting are transactions that at reported as they are gained and incurred within a
reporting period.
DEFINITIONS:
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Document Summary
Week 3 income statements and statement of equity changes. General purpose financial statements have format and content specification, but they have flexibility to assist in preparing reports. Judgement and estimates are used when accounting reports are prepared: depreciation, doubtful debts. For profit revenues exceeding expenses, earning an overall profit. Not for profit based on the mandate, the activities that they are allowed to do for certain purposes. Income statements: shows the financial performance of a company in a given time period by revenue and expenses: revenue, cost of goods sales, gross profit, other expenses, net profit. Current modern businesses will have more than financial statements within their report, just like social and environmental aspects as well. Cash accounting are transactions that involve cash transactions only, where the transfer of cash is made between entities. Accrual accounting are transactions that at reported as they are gained and incurred within a reporting period.