course 4 The Income Statement 损益表.docx

The IncomeStatementBasic Accounting Concepts---Balance Sheet The Money Measurement Concept The Entity Concept The Going-Concern Concept The Cost Concept The Dual-Aspect Concept1. Basic Accounting Concepts Basic Accounting Concepts---Income statementThe Accounting Period ConceptAccounting reports measures activities, results and performance for a specific period of time In the majority of businesses, the accounting year is the fiscal yearB. The Materiality ConceptThe materiality concept states that there must be full disclosure of all important information Full disclosurerequiresthat all important information about the financial condition and activities of an entity must bedisclosed in the reports prepared for outside partiesC. The Consistency Concept The consistency concept states that once an entity has decided on one accounting method, it should use this method for allsubsequent events of the same characterD. The Realization Concept The realization concept states that the amount to be recognized as revenue is the amount that is reasonably certain to be realized Goods are delivered or services are performed The amount is measurable It is reasonably certain that customers will payE. The Matching Concept The matching concept assumes that when an event affects both revenues and expenses, the effect should be recognized in the same accounting period F. The Conservatism ConceptThe conservatism concept deals with the recognition of revenues and expensesRecognizes revenues only when they are reasonably certain to be realizedRecognizesexpenses as soon as they are incurred Stated informally: ‘Anticipate no profits but anticipate all losses’Income Statement Framework A. Cash versus Accrual Accounting Cash Accounting Revenues are recorded when received in cash Costs are subtracted from sales when they are paid Accrual accounting measures income for aperiod as the difference between the revenues recognizedin the period that are matched with the expensesincur