Question in expense recognition video?

Hi, I had a couple of questions so far. I don't really think that we have covered Net Margin so far in the course, even though it was mentioned in the third topic of "The Company and it's financial statements'. Also, in the expense recognition quiz, the question is about whether the income does goes down along with the cash. I'm a little confused about that.

2 Answer(s)


Hi Marc, We do briefly mention Net Income in the earlier modules before we cover it in detail. However, the concept is covered in detail as you finish the next few modules.


Reg the second part of your question, if Tata pays Rs.5 crores for a IT project the company's cash balance comes down by that much in the respective month. However the entire 5 crores is not operating expense since the work takes 6 months to complete and the 5 crores should be divided among that 6 months. Hence only 83.3 lakhs is subtracted from the net income. Is that clear ?

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