会计概念英文名词解释

Session 1 Definitions and Elements of Financial Statements

You will need to learn these underlined terms for the midterm!

I.Income statement–“video” of revenues, expenses, gains, losses

over a period of time

a.Basic definitions:

Revenue–increase in equity (and associated increase in assets

and/or decrease in liabilities) earned from the sale of goods or

provision of services to customers; it is measured on a gross basis

as the amount of assets to be received.

Expense–decrease in equity (and associated decrease in assets

and/or increase in liabilities) created by sale of goods,

rendering of services or passage of time; it is measured on a gross

basis as the amount of assets consumed.

Gain – increase in equity resulting from selling assets or

recognizing the increase in value of assets (or decrease in value

of liabilities); it is measured on a net basis as the positive

difference between current value and amount recorded on the

balance sheet.

Loss – decrease in equity resulting from selling assets or

decrease in value of assets (or increase in value of liabilities);

it is measured on a net basis as the negative difference between

current value and amount recorded on the balance sheet.

Accounting period - the time period between consecutive balance

sheets for which a firm prepares an income statement and statement

of cash flows ., an annual report has a 12-month accounting period and a quarterly statement has a 3-month accounting period).

b.Elements:

Sales - revenue from selling goods or providing services to customers, which is reported as the top line on the income

statement.

Cost of Goods Sold or Cost of Sales labor, material, and overhead costs directly related to providing goods or services.

Gross Profit is the difference between Sales Revenue and Cost of Goods Sold, which represents the profit that is available to cover all of the other expenses on the income statement.

Operating Expenses are expenses related to the ordinary operating activities of the firm of providing goods or services to customers or gains and losses related to operating assets like PPE.

Operating Profit or Income equals gross profit minus operating expenses.

Other Nonoperating Revenue and Expense are items related to

FINANCING activities ., interest expense) and INVESTING

activities ., interest income and gains and losses on

investments).

Income Before Tax equals operating profit minus other income and expense.

Tax expense equals a GAAP based measure of the government charges on income.

Net Income equals income before tax minus tax expense.

c.Income statement accounts are called TEMPORARY ACCOUNTS because

amounts accumulate for a defined period of time and are then zeroed out when the balance is transferred to retained earnings.

Annual income statement amounts represent the total revenues or expenses for a 12 month period called the fiscal year.