4 Revenue and Expenses

Well done! That’s it for Income Statement fundamentals. The next two chapters build on our Income Statement work. We’ll look at timing, asking the questions: when should we enter our sales, and how can we match expenses to the revenue they create? The next chapter tackles revenue recognitionRevenue Recognition:
Determination of the period in which revenue is to be recorded, as governed by relevant GAAP. Revenue is recognized when, or as, it is earned. For inventory, revenue is earned when the risks and rewards of inventory ownership have transferred to the customer., accrualsAccrual Accounting:
Describes the practice of recording revenue, expenses, and dividends in a different period than the cash was received or paid. GAAP requires that the Statement of Financial Position, Income Statement, and Statement of Changes in Equity use accrual accounting. Accrual accounting refers to both accruals and deferrals., and adjusting journal entriesAdjusting Journal Entry:
These change makers adjust balances at period end for timing issues. See also: periodicity..