中南财经政法大学：《中级会计学 Intermediate Accounting》课程电子教案（PPT课件讲稿，英文版）Chapter 4 The Income Statement and Income Recognition

4 The Income Statement and Income Recognition ntermediate Accounting Accounting School. Zhongnan

4 The Income Statement and Income Recognition Accounting School ·Zhongnan University of Economics & Law ntermediate Accounting I 中级会计学

1. Concepts of income Capital Maintenance Concept Under this concept corporate income for a period of time is the amount that may be paid to stockholders during that period and still enable the corporation to be as well off at the end of the period as it was at the b gingin

1. Concepts of income Intermediate Accounting 4 The Income Statement and Income Recognition Capital Maintenance Concept Under this concept, corporate income for a period of time is the amount that may be paid to stockholders during that period and still enable the corporation to be as well off at the end of the period as it was at the beginning

Example of Capital Maintenance Assume a corporation has net assets of $50,000 at the beginning and $90,000 at the end of the year, and that no additional investments or withdrawals were made Ending net assets $90,000 Less: Additiona The corporation could pay Ending net asset out $40,000 to stockholders $90,000 Less: Beginning and still be as well off at 50000) Total income for year-end $40,000

Assume a corporation has net assets of $50,000 at the beginning and $90,000 at the end of the year, and that no additional investments or withdrawals were made. Ending net assets $90,000 Less: Additional investment 0 Ending net assets excluding investment $90,000 Less: Beginning net assets (50,000) Total income for the year $40,000 The corporation could pay out $40,000 to stockholders and still be as well off at year-end. Example of Capital Maintenance Intermediate Accounting 4 The Income Statement and Income Recognition

Intermediate Accounting 4 The Income Statement and Income Recognition Transactional Approach Under this concept, a company records its net assets at their historical cost. and it does not record changes in the asset and liabilities unless a transaction. event or circumstance has occurred that provides reliable evidence of a change in value

Transactional Approach Under this concept, a company records its net assets at their historical cost, and it does not record changes in the asset and liabilities unless a transaction, event, or circumstance has occurred that provides reliable evidence of a change in value. Intermediate Accounting 4 The Income Statement and Income Recognition

Intermediate Accounting 4 The Income Statement and Income Recognition 2. Elements of the Income statement > In FASb statement of Concepts no 6, the FASB defined the elements or " building blocks of the income statement Revenues √ Expenses v Gains v Losses

2. Elements of the Income Statement ➢ In FASB Statement of Concepts No. 6, the FASB defined the elements or "building blocks" of the income statement: ✓ Revenues ✓ Expenses ✓ Gains ✓ Losses Intermediate Accounting 4 The Income Statement and Income Recognition

Intermediate Accounting 4 The Income Statement and Income Recognition Elements of the income statement Revenues Revenues are inflows of assets of Revenue recognition a company or settlement of its is the process of liabilities during a period from formally recording delivering or producing goods and reporting an item rendering services, or other In a company s activities that are the company's financial statements ongoing major or central operations

Elements of the Income Statement — Revenues Revenues are inflows of assets of a company or settlement of its liabilities during a period from delivering or producing goods, rendering services, or other activities that are the company’s ongoing major or central operations. Revenue recognition is the process of formally recording and reporting an item in a company’s financial statements. Intermediate Accounting 4 The Income Statement and Income Recognition

Intermediate Accounting 4 The Income Statement and Income Recognition Elements of the income statement Expenses Expenses are outflows of assets of a company or incurrence of liabilities during a period from delivering or producing goods, rendering services or carrying out other activities that are the company s ongoing major or central operations

Elements of the Income Statement — Expenses Expenses are outflows of assets of a company or incurrence of liabilities during a period from delivering or producing goods, rendering services, or carrying out other activities that are the company’s ongoing major or central operations. Intermediate Accounting 4 The Income Statement and Income Recognition

Intermediate Accounting 4 The Income Statement and Income Recognition Elements of the Income statement-Gains Gains are increases in a companys equity(net assets) from peripheral or incidental transactions of the company and from all other events and circumstances affecting the company auring a period excep those that result from revenues or investments by owners

Elements of the Income Statement — Gains Gains are increases in a company’s equity (net assets) from peripheral or incidental transactions of the company and from all other events and circumstances affecting the company during a period except those that result from revenues or investments by owners. Intermediate Accounting 4 The Income Statement and Income Recognition

Intermediate Accounting 4 The Income Statement and Income Recognition Elements of the income statement Losses Losses are decreases in a companys equity(net assets) from peripheral or incidental transactions of the company and from all other events and circumstances affecting the company during a period except those that result from expenses or distributions to owners

Elements of the Income Statement — Losses Losses are decreases in a company’s equity (net assets) from peripheral or incidental transactions of the company and from all other events and circumstances affecting the company during a period except those that result from expenses or distributions to owners. Intermediate Accounting 4 The Income Statement and Income Recognition

Intermediate Accounting 4 The Income Statement and Income Recognition 3 Income statement content ° ncome from continuing erations Results from discontinued operations EXtraordinary items(net of income taxes Cumulative effects of changes in accounting principles (net oT income taxes) Net income

3. Income statement content • Income from continuing operations • Results from discontinued operations • Extraordinary items (net of income taxes) • Cumulative effects of changes in accounting principles (net of income taxes) • Net income • Earnings per share Intermediate Accounting 4 The Income Statement and Income Recognition