Task Team of FUNDAMENTAL ACCOUNTING School of Business. Sun Yat-sen University economic resources, either through increases to assets or reductions to liabilities Revenue Recognition: Revenue should be recognized in the financial statement when: 1)the performance has been achieved; 2)there is reasonable assurance regarding the measurement and collectability of the consideration Expense: Expenses are decreases in owners equity that arise because goods or services are delivered to customers. Expenses are decreases in economic resources, either through outflows or the using-up of assets or incurrence of liabilities from delivering or producing goods, rendering services, or carrying out other activities that constitute the entitys normal business Expense Recognition: Cost, expenditure, and expense; general recognition criteria pproaches to expense recognition are Cost, Expenditure, and Expense. when we agree to pay out cash(or other assets) for goods or services received, we have incurred a cost. When we actually pay the cash, we have expenditure. When the benefits of the cost have been used and we put that cost(or a portion thereof)on the income statement, we have recognized an expense General Recognition Criteria Recognized items must meet the definition of a financial statement element and have a valid measurement basis and amount. Financial statement elements are based on future economic benefits or sacrifices; these must be probable for recognition to be appropriate Expenses are decreases in economic resources, either by way of outflows or reductions of assets or incurrences of liabilities, resulting from an entity s ordinary revenue generating or service delivery activities Asset or expense? if the asset recognition criteria are met, an asset is recorded. If not, an expense is recorded aches to er Definitional approach: expenses are created either through the reduction of an asset or the increase in a liability Matching approach: once revenues are determined in conformity with the revenue principle for any reporting period, the expenses incurred in generating the revenue should be recognized in lat Profit/loss Income(profit or earnings)is the excess of revenues over expenses ccounting e Assets Liabilities =Owners Equity Net Assets=Owner's EquityTask Team of FUNDAMENTAL ACCOUNTING School of Business, Sun Yat-sen University economic resources, either through increases to assets or reductions to liabilities Revenue Recognition: Revenue should be recognized in the financial statement when: 1) the performance has been achieved; 2) there is reasonable assurance regarding the measurement and collectability of the consideration Expense: Expenses are decreases in owners' equity that arise because goods or services are delivered to customers. Expenses are decreases in economic resources, either through outflows or the using-up of assets or incurrence of liabilities from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity’s normal business. Expense Recognition: Cost, expenditure, and expense; general recognition criteria. Approaches to expense recognition are Cost, Expenditure, and Expense. When we agree to pay out cash (or other assets) for goods or services received, we have incurred a cost. When we actually pay the cash, we have expenditure. When the benefits of the cost have been used and we put that cost (or a portion thereof) on the income statement, we have recognized an expense General Recognition Criteria Recognized items must meet the definition of a financial statement element and have a valid measurement basis and amount. Financial statement elements are based on future economic benefits or sacrifices; these must be probable for recognition to be appropriate. Expenses are decreases in economic resources, either by way of outflows or reductions of assets or incurrences of liabilities, resulting from an entity¡¯s ordinary revenue generating or service delivery activities. Asset or expense? if the asset recognition criteria are met, an asset is recorded. If not, an expense is recorded Approaches to Expense Recognition Definitional approach: expenses are created either through the reduction of an asset or the increase in a liability Matching approach: once revenues are determined in conformity with the revenue principle for any reporting period, the expenses incurred in generating the revenue should be recognized in that period Profit/Loss Income (profit or earnings) is the excess of revenues over expenses Accounting Equation Assets + Liabilities = Owners Equity Net Assets = Owner’s Equity