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Accounting Essay on Accounting Techniques

Accounting Techniques

Single income statements use one mathematical equation in determining the bottom line, or net profit or loss of an organization. In this style of financial computation, the bottom line of a company is considered to be equal to the total revenues and gains, minus the aggregate expenses and losses incurred by the company. Besides, this method does not categorize the income and expenses of the organization by type. However, multi-step income statement uses various subtractions in the determination of the net income exhibited in the bottom line. Multi-step statement considers the separation of the operating revenues and the corresponding operating expenses from the non-profit losses, revenue expenses and the non profit gains. This is among the key reconciliation roles played by the multiple-income statement over the single-step statement. In the current company situation, the multi-step incomes statement shows the gross profit. Based on this, multiple-statement income indicates the gross profit amount, and this assists most of those who read the company’s financial statements to easily motor the gross margin. This also helps users in making comparison of the current gross margin of the organization to its past records of the same. Besides, the two sets of financial statements represent an exclusive summary of the performance of the organization within a given period of time, and also in terms of the net profits of losses it incurs. To sum it up, multiple-step income statement portrays all the items on the income statement.

Revenue recognition is the process of recording the collection of revenue. The process starts with the recognition of transactions earlier enough or too late because the element of timing can significantly misguide the profitability of the company. There are three key elements of revenue recognition, and includes; recognition of revenues immediately they are received, conducting the revenue recognition platform in cash, and calculated with regards to the cash received and the cash equivalent of other items that are also acquired. These are the three basic concepts that are put into consideration in revenue recognition by various organizations.

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