chap3 - CHAPTER 3 Operating Decisions and the Income...

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1 Acct 284 Chap. 3 CHAPTER 3 Operating Decisions and the Income Statement
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2 Acct 284 Chap. 3 Operating Cycle and Time Period Assumptions Operating cycle is the time it takes for a company to pay cash to suppliers, sell goods and services to customers, and collect cash from customers Time period assumption: indicates that the long life of a company can be reported in shorter time periods
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3 Acct 284 Chap. 3 Elements of the Income Statement Revenues - Increases in assets or settlements of liabilities from ongoing operations. Expenses - Decreases in assets or increases in liabilities from ongoing operations. Gains - Increases in assets or decreases of liabilities from peripheral transactions. Losses - Decreases in assets or increases in liabilities from peripheral transactions.
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4 Acct 284 Chap. 3 Income Statement Principles Revenue: revenues are recognized when the following three conditions are met: * earnings process is complete or nearly complete * exchange transaction takes place
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chap3 - CHAPTER 3 Operating Decisions and the Income...

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