COMMERCE 1AA3 Study Guide - Final Guide: Balance Sheet, Financial Statement, Revenue Recognition

• School: McMaster University
• Department: Commerce
• Course: COMMERCE 1AA3
• Professor: Aadil Merali Juma

Document Summary

The income statement, the statement of comprehensive income and the statement of shareholders earning quality provides insight into whether its earning in the current period will persist into future period. 3 important component: proper revenue and expense recognition, low operating expense compared to sales, high and improving operating earnings/sales. Revenue recognition: proper recognition of net revenue/net sales, the revenue should be recognized when it is earned (fulfill the obligation(decreasing the liability)) First, seller deliver the product/service to customer. Then, customer takes both possession and ownership of the product or service. So, seller collect cash or cash in near future. Operating and other expense: largest operation expense include: salaries, wages, utilities, and supplies, lower their costs are relative to sales, Interest expense and interest income (not in ebt) Income tax expense (based on accounting income) xxxx (from tax return)income tax payable xxxx.