PlusStuff

Accounting Fundamentals: Revenue Statement

Image via Wikipedia

The primary and most essential part of an earnings statement is the line reporting sales revenue.  Businesses must be constant from year to year concerning after they record sales. For some enterprise, the timing of recording sales income is a serious downside, particularly when the final acceptance by the client depends upon efficiency assessments or other circumstances that need to be satisfied. For instance, when does an advert company report the sales income for a marketing campaign it’s prepared for its client? When the work finished and sent to the client for approval? When the consumer approves it? When the ads appear in the media? Or when the billing is complete? These are issues an organization must decide on for reporting gross sales revenue, and they must be constant every year, and the timing of reporting must be famous on the monetary statement.

The following line in a revenue statement is the cost of items sold expense. There are three methods of reporting cost of goods sold expense. One is named “first in-first out” (FIFO); one other is the “last in-final out” (LIFO) method and the final is the common price method. Cost of goods sold expense is a huge item in an earnings assertion and the way it’s reported can make a considerable impression on the reported backside line.

Different items in an earnings assertion embody stock write-downs. A enterprise ought to usually look at its inventory fastidiously to determine any losses resulting from theft, injury and deterioration, and to use the decrease of value or market (LCM) method. Dangerous money owed are additionally a necessary element of the revenue statement. Dangerous debts are those owed to a business by customers who bought on credit (accounts receivable) but usually are not going to be paid. Once more the timing of when unhealthy money owed are reported is crucial. Do you report it earlier than or after any collection efforts are exhausted?

Related articles

• Business Accounting Basic : What’s earnings per share(EPS) (dohertyassoc.com)
• Your Trusty Cash Flow Model Spreadsheet – Exactness versus Intricacy (dohertyassoc.com)
• Salesforce reports $584M revenue in Q3, gearing up for $3B next year (venturebeat.com)

Popularity: 1% [?]

Tags: Accounting Courses, accounting courses walkthrough, accounting degree guide, Accounting Fundamentals: Revenue Statement, Accounts receivable, Cost of Goods Sold, FIFO, Financial statement, Income, LIFO, revenue, Sales

Fixed Costs vs. Variable Costs

The difference between fixed costs and variable costs is that fixed costs don’t fluctuate as your sales volume changes.  The landlord expects the same rent every month regardless of whether you are having a good month or a bad month.  Rent is typically a fixed cost.

Variable costs are tied to sales and usually are either Cost of Goods Sold (often called COGS) or some other direct expense tied to sales such as commissions, shipping charges or packaging.  If I were a hot dog vendor – the more I sell, more supplies I need – hotdogs, buns, condiments, sauerkraut, napkins – my food costs are directly related to sales.

There are exceptions of course.  If my business grows dramatically, I may need to take on a larger space thus increasing my rent.

Popularity: 2% [?]

Tags: COGS, Cost of Goods Sold, fixed costs, Fixed Costs vs. Variable Costs, sales volume, variable costs