Chapter 3 Operating Deiciosna and the Income Statement_Notes

Chapter 3 Operating Deiciosna and the Income...

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Chapter 3 – Operating Deiciosna and the Income Statement How do business activities affect the income statement Operating cycle – cash-to-cash cycle. Time it takes for a company to pay cash to suppliers, sell goods and services to customers, and collect cash from customers Operating cycle continuously repeated Time period assumption – indicates that the ong life of a company an be reported in shorter time periods Revenues – increases in assets or sett;ements of liabilities from ongoing operations Multiple step – uses operating income and income before taxes If a customer pays for something in advcnace, a liability account is created and it is not relieved into the company provides the promised goods Expenses – decreases in assets or increases in liabilities from ongoing operations incurred to generate revenues during the period Investment income or revenue, and interest expense are peripheral transactions. Gains – increase sin asset s or decreases in liabilities from peripheral transactions
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