ACC 203 Lecture Notes - Lecture 15: Income Statement

• School: Pace University
• Department: Accounting
• Course: ACC 203
• Professor: Donabedian

Document Summary

Financial accounting: expense recognition: on same income statement. Income statement then contains measures of both accomplishment (revenue) & effort (expense) & enables an assessment of firm performance: governs expense recognition, is implemented in 1 of 3 ways, associating cause & effect: A lot of costs cannot be directly linked to specific revenue transactions: can however be tied to span of yrs. & allocated as an expense to each of those yrs: ex: sales equipment is essential to generate revenue, linking cost of each display case, piece of furniture & the like to specific sales transactions is difficult. Instead, equipment"s cost is systematically allocated as depreciation expense to yrs. during which equipment helps generate revenue: immediate recognition: Some expenditures have no discernible future benefit. In these cases, expenditure is expensed immediately. Treated in this manner are: officers" salaries, utilities, interest, extraordinary items: events and transactions that are unusual in nature & infrequent in occurrence.