Income & Expenses Lecture Notes

These flashcards cover key concepts and definitions related to income, expenses, and revenue recognition, as discussed in the lecture notes.

What is the definition of income according to the AASB Framework?

Income is defined as increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases in liabilities that result in an increase in equity.

According to AASB 101, what must be included in the statement of profit and loss?

The statement must include profit or loss, total other comprehensive income, and comprehensive income for the period.

What are the two categories of income identified in the AASB Framework?

Revenue and gains.

What does 'control' refer to in revenue recognition?

Control refers to the ability to direct the use of and obtain substantially all of the remaining benefits from an asset.

What is the significance of performance obligations in revenue recognition?

Performance obligations must be identified and satisfied for revenue to be recognized under AASB 15.

What are the criteria for recognizing an expense according to the AASB Framework?

An expense is recognized when a decrease in future economic benefits related to a decrease in an asset or an increase of a liability has arisen that can be measured reliably.

What are the common journal entries for closing income and expense accounts?

Close income accounts: Dr Income Accounts, Cr Income Summary Account; Close expense accounts: Dr Income Summary Account, Cr Expense Accounts.

What is variable consideration in the context of revenue recognition?

Variable consideration refers to when the transaction price may vary based on factors like returns or discounts.

How should an entity account for unearned revenue?

Unearned revenue is recorded as a liability when payment is received and recognized as revenue when the performance obligation is satisfied.

What is the matching principle in accounting?

The matching principle states that expenses should be recognized in the same period as the related income they help to generate.