The Accrual Concept. What is it? Definitions  Economic income  Distributable earnings  Permanent earnings  Accounting income.

Slides:

Advertisements

Similar presentations

The Income Statement, Comprehensive Income, and the Statement of Cash Flows Chapter 4 Chapter 4: The Income Statement, Comprehensive Income, and the.

Advertisements

The Income Statement and Statement of Cash Flows Sid Glandon, DBA, CPA Associate Professor of Accounting.

1 © Copyright Doug Hillman 1999 Additional Stockholders’ Equity Transactions and Income Disclosures.

The Income Statement, and Comprehensive Income.

FINANCIAL ANALYSIS: The Big Picture

Intermediate Accounting I - Fall Session 3 Accounting Assumptions and Principles Balance Sheet Wrap-up The Complete Income Statement Separately.

Chapter 4: Income Statement and Related Information

CHAPTER 4 Income Statement and Related Information ……..…………………………………………………………... Usefulness of the Income Statement Income and expenses for a given period.

Reporting Irregular Items on the Multi-Step Income Statement Georgia CTAE Resource Network Curriculum Office, June 2009 To accompany curriculum for the.

Income Statement Chapter 4 © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website,

Chapter 3 Measuring Performance. Cash versus Accrual Cash is basically a checking account method  Cash in and cash out  Statement of cash flows  Less.

McGraw-Hill /Irwin© 2009 The McGraw-Hill Companies, Inc. THE INCOME STATEMENT AND STATEMENT OF CASH FLOWS Chapter 4.

ACTG 3110 Chapter 4 The Income Statement and Related Information.

1 Module 5, Part 1: Operating Income 1.Income statement categories -operating revenues -research and development expenses -restructuring expenses -discontinued.

Chapter 4 Statement of Income and Retained Earning Retained Earning.

Earnings Measures. Understanding Sustainable Earnings Sustainable earnings are also called permanent earnings and non- sustainable earnings are called.

FA3 Lesson 6: Accounting for income tax 1.Intraperiod tax allocation 2.Permanent and temporary differences 3.Deferral method vs. liability method 4.Tax.

Discussion Section #1 Financial Accounting

Chapter 5 The Income Statement. 2 Financial Accounting, 7e Stice/Stice, 2006 © Thomson Business Deals Beginning of YearEnd of Year Income Measurement.

Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Income Measurement and Profitability Analysis 5.

The Income Statement and Statement of Cash Flows

Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Chapter 13 Measuring and Evaluating Financial Performance.

UNDERSTANDING FINANCIAL STATEMENTS

Understanding Financial Reports and the Income Statement Chapter 2.

4.01 Understand financial planning..  Assets: what the company owns  Liabilities: what the company owes  Owner’s Equity: value of owner’s investment.

Income Statements. Income Statement One of four financial statements issued by a business Reports the amount a company has earned between 2 balance sheet.

The Income Statement Chapter 4. Introduction Four major types of items appear on income statements. –Revenues –Expenses –Gains –Losses.

Income Statement & Statement of Changes in Equity CA BUSINESS SCHOOL EXECUTIVE DIPLOMA IN BUSINESS AND ACCOUNTING SEMESTER 1: Preparation of Financial.

Reporting and Analyzing Operating Income

Chapter 6 Accrual Accounting Concepts and the Accounting Cycle.

Copyright ©2012 Pearson Education Inc. Publishing as Prentice Hall. 1.

Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Chapter 13 Measuring and Evaluating Financial Performance.

FSA: Carlos A. Mello-e-Souza 1 title Quality of Accounting Information and International Comparisons by Carlos A. Mello-e-Souza.

CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 18-1 Understanding Cash Flow Analysis.

1 Chapter 13: Income Statement. 2 I. Financial statement relationships. II. Income statement categories: 1. operating revenues and expenses 2. other revenues.

R. G. QUINTERO & CO. CFA LEVEL I Q-NOTES STUDY SESSION 8 (EXCERPT) FINANCIAL STATEMENT ANALYSIS: UNDERSTANDING THE UNDERSTANDING THE FINANCIAL STATEMENTS.

INCOME MEASUREMENT AND PROFITABLITY ANALYSIS Chapter 5 © 2009 The McGraw-Hill Companies, Inc.

Chapter 5 The Income Statement. 2 Financial Accounting, 7e Stice/Stice, 2006 © Thomson Business Deals Beginning of YearEnd of Year Income Measurement.

1 The Income Statement Chapter 5. 2 Objectives for the day After reviewing homework… 1. Examine Key Issues relating to Income Statement. 2. Examine the.

Lesson 3 INCOME STATEMENTS Li, Jialong

The Complete Income Statement Presentations for Chapter 13 by Glenn Owen.

1 Module 5, Part 1: Operating Income 1.Income statement categories -operating revenues -research and development expenses -restructuring expenses -discontinued.

Module 5 Reporting and Analyzing Operating Income.

Chapter 11: The Income Statement Evolving definitions Future events Comprehensive income Earnings Per Share Earnings management New proposals.

W. F. Bentz A&MIS 521 Chapter 4 l Statement of earnings (SOE) format and content elements l Items that are either unusual or infrequent, but not both l.

ANALYZING OPERATING ACTIVITIES. Accounting Concept of Income  Based on the concept of accrual accounting  Two major process in income measurement :

Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Statements of Net Income and Comprehensive Income

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 18-1 Understanding Cash Flow Analysis.

Statement of Cash Flows Primary purpose: To provide information about a company’s cash receipts and cash payments during a period. Secondary.

Accounting for Irregular Items Change in estimate Normal & recurring for correction and adjustment Unusual gain or loss Material; typically from operating.

Temporary Differences between Book and Tax Income.

Economics 410 Managerial Economics Thursday October 7, 1999.

The Income Statement Balance Sheet –The financial condition of the company on a certain date (a snapshot on that date) –What is OWNED and what is OWED.

Copyright © 2015 McGraw-Hill Education. All rights reserved. Chapter 2 Review of the Accounting Process.

Chapter 6 Accounting for Sales.

A2 - 1 Accounting Income and Assets: Accrual Concept.

Demonstration Problem

Chapter 8 – Financial Statements for a Proprietorship

Financial Accounting:

Chapter 4 The Income Statement, Comprehensive Income, and the Statement of Cash Flows ACCT-3030.

Valuation and Forecasting

Accounting for Accruals and Deferrals

The Income Statement and Statement of Cash Flows

Intermediate Accounting

INCOME STATEMENT INFORMATION ON A WORK SHEET

Chapter 13: Income Statement

Chapter 4 Income Statement

Analyzing operating activities

L2 - Chapter 4 Income Statement

Presentation transcript:

The Accrual Concept

What is it?

Definitions  Economic income  Distributable earnings  Permanent earnings  Accounting income

Review??  Income statement –Various formats –Suggested format (p 35) –Why shouldn’t we use presented format? –What about nonrecurring items?

Empirical research Surprising to me!!! Predictive ability? Unusual & infrequent items Why do you think that’s true?

Revenue Recognition Timing?Measurement?

Different ways to recognize revenue Prior to title passage After title passage

Remember construction accounting? Completed contract vs % of completion? Costs incurred? What type of account? Amt’s billed to customers? What type of account Impact of choice of method on financials??

Additional revenue recognition methods Installment method Cost recovery method

Accounting Issues Revenue Recognition Sales incentives Barter Membership fees Estimates Gross vs net recognition Early recognition Shipping & handling

Accounting Issues Expense Recognition Deferrals Bad debt Warranties

Accounting Issues Classification From cgs to operating expense

Complex Revenue Recognition SoftwareBroadcast Mortgage issuers Exercise clubs Incentives

Nonrecurring Items Unusual or infrequent DiscontinuedExtraordinaryChange

Unusual or Infrequent “Special items” ReorganizationsRestructurings Incentive to increase losses?

Discontinued Items Segregate operating income, any gains/losses (net of taxes) as of the measurement date.

Extraordinary Items Unusual AND infrequent Plus g/l from early retirement of l.t. debt (most from this)

Accounting Changes Voluntary vs. mandatory

How to Analyze Nonrecurring Ignore company’s classification Sometimes nonrecurring recur a lot Income statement: Misreporting impacts prior and future income Cash flow statement: No impact Current period only Future impact Implications for continuing operations

Earnings Manipulation Timing Income smoothing IntertemporalClassificatoryBig-bath Accounting changes Classification Good news/bad news

Empirical Research Big bath --- not proven Smoothing – proven

Quality of earnings Consistency versus Conservatism

Balance Sheet  A = L + SE