C. A.

Akila Kalyanaraman
SOURCE : http://www.hul.co.in/investorrelations/AnnualReports/AnnualReport2012-13/Downloadcentre.aspx
Cash at
Bank
Purchase of
raw
materials
Conversion
into
finished
goods
Inventory of
WIP,
finished
goods
Sale to
customers
on account
Collection
of debtor
money
THE
OPERATING
CYCLE
SOURCE: http://www.businessbankertwincities.com/2011/12/small-business-loan-application.html
Income Statement summarizes the Revenues and
Expenses of an entity for an accounting period

Revenue : is the value of earnings resulting from the
operations of the entity during the current period.

Expense : is the cost of resources used during current
period for the operations of the entity.

Revenue minus Expense = Income

Income increases Owners Equity.
Accounting Period Concept : Accounting
measures activities for a specified INTERVAL
of time called Accounting period

Year - Annual Report
Quarter (Q1,Q2,Q3,Q4) - Interim Report

Eg: Income Statement for the year ended
March 31
st
,2013.

Conservatism Concept : explains WHEN Revenue
or Expense has to be recorded.

ANTICIPATE NO PROFITS
but,
ANTICIPATE ALL LOSSES

Revenues are recognized only when they are reasonably
certain, whereas expenses are recognized as soon as they
are reasonably possible.

Eg: Sales Revenue, Accrued Interest

Realization Concept : Indicates HOW MUCH to
be recognized as Revenue.

Eg: The amount of Sales Revenue will be
what the customers are reasonably willing to
pay.
If sold at Discount on MRP, then
Sale Value = Discounted Price
Matching Concept : When a given
event affects both Revenues and
Expenses, the effect on each
should be recorded in the same
accounting period.

Expenditure is the cost incurred in
acquiring goods or services to be used
as Asset or for Usage during the
period, whether paid or unpaid.

Eg: Expenditure on purchase of
Office Computer - Asset
Paper for office use - Expense


Expenditure
When
Current
Period
Expense
Future Asset
What
Asset
Usage Expense
Expenditure
incurred
during time
T
T
T
Payment
made
during time
T
T
T+1
Pertaining
to time
T
T+1
T
Recorded
as
Expense in
T
Asset in T
and
expense in
T+1
Liability in
T and
expense in
T
Example
Period
costs
Prepaid
Insurance
Unpaid
wages for
last month.
Consistency Concept : Entity required
to follow consistent accounting
practices.
eg: Inventory Valuation

Materiality Concept : Insignificant
events may be disregarded, but full
disclosure of all important
information.
SOURCE : http://ashishtater.wordpress.com/2012/01/11/schedule-vi-revised-pl-format/
Anthony, Hawkins, & Merchant (AHM) Chapter 3

http://www.hul.co.in/investorrelations/AnnualRep
orts/AnnualReport2012-13/Downloadcentre.aspx

http://www.businessbankertwincities.com/2011/
12/small-business-loan-application.html

http://ashishtater.wordpress.com/2012/01/11/
schedule-vi-revised-pl-format/




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