COMMERCE 1AA3 Lecture Notes - Lecture 2: Retained Earnings, Net Income, Income Statement

• School: McMaster University
• Department: Commerce
• Course: COMMERCE 1AA3
• Professor: Aadil Merali Juma

Document Summary

Revenue vs gains: annual salary is an example of revenue, gains are from external actions (selling your car/house) Format of an income statement: title of company, title, date (always ends after a period of time like fiscal quarter or year-end, revenues, expenses. Dividends are distributions to owners from accumulated earnings. Owners either collect dividends or reinvest them into the business depending on the situation. Certain industries have to pay dividends because they don"t have the growth opportunities as others (example: microsoft vs gm). Investors usually want dividends unless the company is undergoing exponential growth (example: R&d expensing: right to future benefits, quantifiable. Assets: measurement: historical cost (initial cost, important because if something is worth k but was bought for k, the historical cost represents the fairest price. Assets: disclosure: current assets, includes, expected to be converted to cash, sold, or consumed in the next year or within the business" operating cycle, whichever is longer.