Hello, this is Huw Morgan from the Alliance Manchester Business School.
This is the fourth talk in the series of lectures on Accounting Records.
In this lecture, we see the typical format of the income statement and then
focus on the ways in which sales on credit terms are recorded,
managed and controlled in the accounting records.
This section outlines the typical presentation of the income statement,
that summarises the trading and operating transactions arising in an accounting period.
We shall then focus on the impacts that credit transactions,
specifically selling to customers on credit,
will have on the accounting records.
The more sales made on credit,
the closer a business will need to monitor what it is owed and received
through the use of the Sales Ledger and Sales Day Book.
Income is defined as increases in economic benefit from revenue,
or gains during the accounting period,
that increase equity other than contributions from the owners.
There are two elements to income:
Revenue, or sales income from trading,
and non-operating income - gains from transactions other than normal trading activity.
Both types result in an increase in economic benefit to the business,
which results in an increase in equity.
A current issue in financial accounting is the question of when to recognise a sale.