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ACTG 1P91 Lecture Notes - Accrual, Net Income, Income Statement

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Linda Stillabower

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Class #3! ! ACTG 1P91!September. 27th, 2011
TA - Marker - Michael- 905-964-3222 - Text or Call or Leave Message
Income Statement
- Revenue - Expenses = Net Income
- Sales | Revenue
- Subtract Sales Returns & Allowances (SR&A) --> seen in Cash, AR
- Net Sales (Cost of Goods sold)
- Subtract Cost of Goods sold (COGS) --> seen in Cash, Inventory, AP
- You get Gross Margin (SG&A)
- Subtract SG&A (various expenses) Selling Expenses, General Expenses, , --> seen in
Fixed Assets, Payables
-NOI - (Net Operating Income)
- Subtract Interest - seen in Financing
- Earnings before taxes (EBT)
- Subtract taxes to get Net Income
- EBIT = Earnings before Interest and Taxes
Balance Sheet
- Assets = Liabilities + Owners Equity
- Assets = Explanation of where it came from
- Within the Stockholder’s Equity is where it gets more complicated
- Investors (makes OE go up) | Withdrawals (make OE go down)
- Revenue (makes OE go up) | Expenses (make OE go down)
- Stockholders Equity = Investors
- Net income belongs to the owners
- As we make changes in the Income Statement changes are seen in the Balance Sheet
either in cash etc.
- Cash, Inventory, AP
Cash --> Raw Materials --> Finished Product --> Inspect Product --> Warehouse -->
Receive Order --> Fulfill Order (Deliver to Customer) --> Acknowledges Receipt -->
When does Revenue get recognized?
1. Delivery has occurred or services have been rendered
2. The price is fixed or determinable
3. Collection is reasonably assured
If the product being sold is a commodity, revenue is recognized at the warehouse
If the product being sold is a construction service, revenue is recognized at various
completion points
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