Download Exercises Unit Twelve

Revenue, Expense and
Profit
Unit Twelve
Learning Objectives
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Unit Twelve
to make the entries for sales revenues under
a perpetual inventory system;
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to state the deductions from sales revenues;
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to explain the revenue recognition principle.
Warming-up
Unit Twelve
Magazines that receive subscriptions in
advance must record the receipts as unearned
revenues. Likewise, airlines that receive ticket
payments in advance must record the receipts as
unearned revenues until the passengers use the
tickets.
The tuition you pay at the beginning of each
term is an example of a deferred expense to you,
as a student.
Text Skimming
Ask students to read the text quickly and ask
them some questions.
1. How many essential characteristics are there
in revenue? What are they?
2. How many methods are there to account
sales discount? What are they?
3. What are two important distinctions between
revenues and gains and between expenses and
losses?
4. What is expense? What does expense
include?
Unit Twelve
Vocabulary
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enhancement
render
ongoing
overnight
attorney
real estate
stem
associate
peripheral
extraordinary
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增强(作用)，促进(作用)
提出，开出
前进，发展
在短时内
律师
不动产；房地产
出自，来源于
关联
外部的
特别的，突出的，临时的
Presentation
Revenue
Revenues are the inflows or other
enhancements of assets of an entity or
settlements of its liabilities ( or a
combination of both ) during a period
from delivering or producing goods,
rendering services, or other activities that
constitute the entity's ongoing major or
central operations.
Revenues have two essential characteristics:
they arise from an enterprise's primary
earnings activities;
Accounting theorists sometimes
describe
as or
" entity
accomplishments"
they arerevenue
recurring
continuing
in nature.
or " the product of the enterprise".
（1）Sales Revenue
The sales of goods occurred between two
parties. From the seller's point of view,
sales are made to create revenue, which is
the inflow of assets resulting from the
rendering of services or the sales of goods
to customers.
（2） Recording Gross Sales
Sales revenues, like service revenues, are recorded when
earned. This is done in accordance with the revenue
recognition principle.
收入确认原则
Sales may be made on credit or for cash. Every sales
transaction should supported by a business document
that provides written evidence of the sale. Cash register
tapes provide evidence of cash sales. A sale invoice
provides support for a credit sale. The original copy of the
invoice goes to the customer. A copy is kept by the seller
for use in recording the sale. The invoice shows the date of
sale, customer name, total sales price, and other relevant
information.
收银机
Entries should be made to record the sales.
The first entry records the sale: Cash ( or accounts
receivable, if a credit sale) is increased by a debit,
and sales is increased by a credit at the selling price
of the goods.
The second entry should record the cost of goods sold.
（3） Deduction from Sales Revenue
On the seller's book, sales discounts and sales returns
and allowances are deducted from sales revenue to
yield net sales. These are contra revenue accounts to
the sales account.
In a purchase transaction, the seller may offer the
customer a cash discount for the prompt payment
of the balance due. From the seller’s point of view, this
is called a sales discount. Like a purchase discount, a
sales discount is based on the invoice price less returns
and allowance if any.
Like purchase transaction, there are
basically two methods of accounting for
sales discounts:
⑴ the gross price procedure
⑵ the net price procedure.
（4）Revenue Recognition
Revenue is realized when a sale is
completed by the delivery of a product.
Because of this, the word “sales” is
often used along with revenue, as in
the phrase “sales revenue”.
When is revenue recorded in the
accounting records?
The revenue realization principle states that
a business should record its revenue at the
time service are rendered or goods are
delivered to customers. In short, revenue is
recorded when it is earned, without regard
as to when the cash is received.
Four revenue transactions are recognized in accordance
with the revenue realization principle:
Companies recognize revenue from selling products
at the date of sale. This date is usually interpreted the
date of delivery to customers.
Companies recognize revue from service provided,
when services have been performed and are billed.
Companies recognized revenue from permitting others
to use their assets, such as interest, rent, as the time
passes or as the assets are used.
Companies recognize revenue from disposing of
assets other than products at the date of sales.
Expenses
Expenses are outflows or other using up of
assets or increase of liabilities ( or a
combination of both )during a period from
producing or delivering goods, rendering
services, or carrying out other activities that
constitute the entity's major or central
operations.
Expenses include the cost of employee’s salaries,
advertising, rent, utilities, and the gradual
depreciation of fixed assets. All these costs are
necessary to attract and serve customers and
thereby earn revenue. Expenses are sometimes
described as “entity efforts” or “entity
sacrifices”associated with the earning of
revenue.
Expenses are classified into three
categories:
⑴ Cost directly associated with the revenues of
the period.
⑵ Cost associated with the period on some basis
other than a direct relationship with revenue.
⑶ Cost that cannot, as a practical matter,
be associated with any other period.
Gains
Gains are increases in owner's equity or net
assets that result from peripheral or incidental
transactions by an entity. In other words, gains
arise from transactions and economic events
that do not result in either revenues or owner
investment.
Losses
Losses are decreases in owner's equity or net
assets arising from peripheral or incidental
transactions by an entity. Losses arise from
transactions and economic events that do not
result in either expenses or distributions to
owners.
There are two important distinctions between
revenues and gains and between expenses and
losses.
First, both revenues and expenses related to
the major or primary operating activities of
an enterprise, whereas both gains and losses
related to peripheral activities.
Second, revenue and expenses refer to
gross inflows and outflows, whereas gains
and losses refer to net inflows and outflows.
Net Income (or Net Losses)
Net income (or net loss) refers to the periodic
change in owner's equity or net assets of an
entity as a result of transactions and other
economic events that result in revenues,
expenses, gains and losses.
Mathematically, net income (or net loss) is
determined by revenues, expenses, gains and
losses as follows：Net income ( or net loss) =
revenues - expenses + gains - losses. If revenues
and gains exceed expenses and losses, the result
is called net income; if expenses and losses
exceed revenues and gains, the difference is
called net loss.
Notes
Unit Twelve

Revenues are the inflows or other enhancements of
assets of an entity or settlements of its liabilities (or a
combination of both) during a period from delivering or
producing goods, rendering services, or other activities
that constitute the entity’s ongoing major or central
operations.
收入是指企业在销售或生产产品、提供劳务或其他维持企
业持续正常运行的主要经营活动时所形成的资产流入或增
加以及债务的清偿（或二者的结合）。
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realization principle 实现原则，也称收入实现原则
这是用来指导收入确认的会计原则。它的基本含义是，只
有当赚取收入的过程基本完成，收入的金额可以计量，金
额的收取基本确定的时候才应该在帐面上反映收入。
Notes
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Unit Twelve
Expenses are outflows or other using up of assets or
increase of liabilities (or a combination of both) during a
period from producing or delivering goods, rendering
services, or carrying out other activities that constitute
the entity’s major or central operations.
费用是指企业在生产或销售商品、提供劳务或其他日常活
动中所发生地资产的外流或消耗费或债务的增加（或二者
的结合）。
Revenue, Expense and
Profit
Unit Twelve
Review
 1.
Ask students to read all the new
words and phrases.
 2.
Review the language points.
Unit Twelve
Exercises
II. Terms Study.
Match the terms in column A with the definitions in column B.
A
1. revenues
2. Sales Returns and
Allowances
3. expenses
4. net income
5. gains
B
A. periodic change in owner’s equity or net assets of
an entity as a result of transactions and other
economic events that result in revenues, expenses,
gains and losses
B. increases in owner’s equity or net assets that result
from peripheral or incidental transactions by an
entity
C. inflows or other enhancements of assets of an
entity or settlements of its liabilities
D. outflows or other using up of assets or increase of
liabilities
E. a contra revenue account to Sales
Exercises
Unit Twelve
III.
Decide whether the following statements are true or
false. Write T for true and F for false.
( F )1. An expense always causes an increase in owner’s
equity.
( T ) 2. Expenses are sometimes described as “entity efforts”
or “entity sacrifices” associated with the earning of
revenue.
( F ) 3. Gains arise from transactions and economic events
that result in either revenues or owner investment
Exercises
Unit Twelve
( T ) 4. To determine profit (a net amount) from sales, it is
necessary to subtract cost of goods sold from sales
revenue.
( T ) 5. As in current practice, the term earnings sometimes
will be used as a synonym for gross income, or as a way
of capturing the elements (i.e., revenues, expenses,
gains and losses) that make up income.
Exercises
Unit Twelve
IV. Translation the following into Chinese.
1. Expenses are classified into three categories:
(1) Cost directly associated with the revenues of the period.
(2) Cost associated with the period on some basis other
than a direct relationship with revenue.
(3) Cost that cannot, as a practical matter, be associated
with any other period.
费用被分为三类：
(1)是一段时期直接与收入相关的费用。
(2)是一段时期内与收入没有直接关系的费用。
(3)形成实际事物，而不与任何特定时期相关的支出。
Exercises
Unit Twelve
2. As in current practice, the term earnings sometimes will be
used as a synonym for net income, or as a way of
capturing the elements (i.e., revenues, expenses, gains
and losses) that make up income.
在实际操作中，收益这个词有时也被当作同义词来代替净收
入，或者用来像其他要素（收入、费用、利润、损失）一样
用来计算净收入。
3. The items included in net income are displayed in four
classifications:
continuing
operations,
discontinued
operations, extraordinary items and cumulative effects of
changes in accounting principles.
净收入基本上在以下4种情况下表现出来：持续经营活动，
不连续的经营活动，额外项目和会计准则改变的累计影响。
Assignments
 Do
Ex. Ⅱ in the exercise books.