Chapter3b

Chapter3b - Week3 Chapter3b WhatisNetIncome?...

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Week 3 Chapter 3b What is Net Income?
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Net income is not an asset it’s an increase in owners’ equity from profits of the business. A A = L L + OE OE Increase Decrease Either (or both) of these effects occur as net income is earned . . . Increase . . . but this is what “net income” really means. What is Net Income?
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A A = L L + OE OE Retained Earnings Capital Stock Retained Earnings The balance in the Retained Earnings account represents the total net income of the corporation over the entire lifetime of the business, less all amounts which have been distributed to the stockholders as dividends.
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The Income Statement The income statement reports the amount earned during the period – revenues – and the costs incurred during the period – expenses . Bottom line: net income or earnings The income statement reports how successful a business is at generating profits from its sales
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How do business activities affect the Income Statement? What’s the typical definition of an operating cycle of a business? What are the elements of the Income Statement? The time period assumption
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Operating Cycle Companies (1) acquire inventory and service of employees and (2) sell inventories and service to customers. Operating Cycle: the time between when
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Chapter3b - Week3 Chapter3b WhatisNetIncome?...

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