Module 2 Notes.docx - ACCT 701 u2013 LSUS Module 2...

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ACCT 701 – LSUS Module 2 Chapters 7 & 9 Financial Statements – Balance Sheet, Income Statement, and Statement of Cash Flow (&/or Statement of Retained Earnings) Income Statement – Results of operations, Summary of revenues and expenses over period of time - Single Step – all revenues & gains grouped together at top, expenses & losses group together underneath = sum yields net income o Quickly & simply calc. net income but fails to provide useful details about business performance - Multiple Step – multiple sections, subsections, and subtotals including gross profit o Gains & Loss separately from Revenue & Expenses o Operated Income Rev & Expenses reported separately from all others Distinguish income from continuing operations, discontinued operations, extraordinary gains & losses, net income, comprehensive income o GAAP requires Multiple Step Income Statements o Provides investors with more information about financial performance of company o Sales - Sales Returns & Allowances = Net Sales o Gross Profit = Net Sales – Cost of Goods Sold o Cost of Goods Sold = (Beginning Inventory + Purchases) – Ending Inventory, cost to the seller o Gross Profit= Net Sales – Cost of Goods Sold, profit a company has left for other operating/non-operating after covering cost of goods sold o Operating Income = Gross Profit – Operating Expenses, earned from normal business operations o

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