RSM219H1 Chapter Notes - Chapter 4: Revenue Recognition, Cash Flow, Net Income

• School: UTSG
• Department: Rotman Commerce
• Course: RSM219H1
• Professor: Scott Douglas

Document Summary

Statement of cash flows and statement of income are 2 of the 4 basic financial statements that measurer the (cid:272)o(cid:373)pa(cid:374)(cid:455)(cid:859)s pe(cid:396)fo(cid:396)(cid:373)a(cid:374)(cid:272)e o(cid:448)e(cid:396) the pe(cid:396)iod. Revenues are inflows of e(cid:272)o(cid:374)o(cid:373)i(cid:272) (cid:271)e(cid:374)efits (cid:894)(cid:272)ash o(cid:396) a/ (cid:895) o(cid:374) a (cid:272)o(cid:373)pa(cid:374)(cid:455)(cid:859)s o(cid:396)di(cid:374)a(cid:396)(cid:455) ope(cid:396)ati(cid:374)g activities- selling goods or services. The(cid:396)e does (cid:374)ot ha(cid:448)e to (cid:271)e a (cid:396)e(cid:272)eipt sho(cid:449)i(cid:374)g a(cid:374) i(cid:374)flo(cid:449) of (cid:272)ash, the(cid:396)efo(cid:396)e the (cid:449)o(cid:396)k (cid:858)e(cid:272)o(cid:374)o(cid:373)ic (cid:271)e(cid:374)efit(cid:859) is used. Although the e(cid:272)o(cid:374)o(cid:373)i(cid:272) (cid:271)e(cid:374)efit (cid:449)ill fi(cid:374)all(cid:455) (cid:271)e (cid:272)ash, it is (cid:374)ot (cid:374)e(cid:272)essa(cid:396)(cid:455) to ha(cid:448)e the payment and the receipt at the same time. Revenue is the most important amount in the financial statements and the total should always exceed the total expenses for the company to be profitable (reporting net income). This way financial statement users look at the company as viable, that can grow, and give dividends. When expenses are greater than revenues, the company report net loss. The company should then evaluate the cause and the size of the loss.