ACCT1101 Lecture Notes - Lecture 8: Accounting Equation, Income Statement, Financial Statement
Document Summary
Important for evaluating business performance for a wide range of users. Gross profit: difficult to buy your purchases in a cheaper price (unless bulk buying or manufacturing overseas) Customers get an allowance when a product is not perfect. Internal control (can track information internally: providing information to management (faulty goods ---> discount, sales revenue is reduced by the amount of the quantity of cash discount when the discount is taken. Net sales revenue: net sales revenue is sales revenue for the period less all discounts, returns and allowances for the period, total discounts, returns and allowances is often reported separately on the income. Statement prepared for internal users: changes in the level of discounts, returns and allowances can provide important information about pricing and quality control. Less common to report this information to external financial statement users. Cogs business must decide what inventory system they need to calculate their cost of good sold.
