11_Accruals - 11 Accruals Accountancy 301 Click to edit...

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Click to edit Master subtitle style 6/5/11 Accruals Accountancy 301 Professor Clifton Brown 11 September 29, 2010
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Cash vs. accrual vs.  Operating  Cash Flow Accrual  Income Economic  Income Operating cash  inflows – Operating  cash outflows Revenues – Expenses = „  Net Assets* *Excluding transactions with equity  holders   (PV FCF )
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6/5/11 The effects of a transaction Assume Whirlpool acquires a new drill press for one of its assembly plants, paying $6,000 in cash to Grainger, an industrial machine company Cash flow Accrual accounting Economic No w Fut ure Effects Cash flow – investing, but not operating effect now; indirect future operating cash flow through earnings process Accrual accounting – only effect now is change in composition of assets; future expense (depreciation) Economic – a current investment – what is its future cash flows?
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6/5/11 Product warranties Buy er Sell er Sale & Warra nty
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6/5/11 A warranty is a transfer of some of the risks of ownership from the buyer back to the seller. It is a seller’s guarantee given to a purchaser, usually specifying that the seller will make any repairs or replace defective parts free of charge for a stated period of time. Warranties represent future costs the
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This note was uploaded on 06/05/2011 for the course ACCT 301 taught by Professor Yueli during the Spring '10 term at University of Illinois, Urbana Champaign.

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11_Accruals - 11 Accruals Accountancy 301 Click to edit...

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