ORIE ch 3 outline

ORIE ch 3 outline - CH 3—INCOME STATEMENT REPORTING THE...

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ORIE 350 CH 3 O UTLINE C H 3—I NCOME S TATEMENT : R EPORTING THE R ESULTS OF O PERATING A CTIVITIES 1. I NCOME S TATEMENT 1. Profit margin percentage = relation between net income and revenues 2. Income statement reports net income (or earnings) for a particular period of time 3. Net Income = Revenue – Expenses 4. Revenue measures net assets that flow into a firm when it sells goods or renders services 5. Expenses measure net assets that a firm consumes in the process of generating revenues 2. A CCOUNTING P ERIOD C ONVENTION 1. Accounting period 2. Natural business year or fiscal period 3. A CCOUNTING M ETHODS FOR M EASURING P ERFORMANCE 1. Cash Basis of Accounting (BAD!) 1. Firm measures performance from selling goods & providing series as it receives cash from customers and makes cash expenditures to providers of goods and services 2. Inadequately matches inflows and outflows 3. Unnecessary delays the recognition of revenues 4. Provides opportunities to distort the measurement of operating
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This note was uploaded on 04/05/2009 for the course ORIE 350 taught by Professor Callister during the Summer '08 term at Cornell.

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ORIE ch 3 outline - CH 3—INCOME STATEMENT REPORTING THE...

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