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Financial Accounting Chapter 3

Financial Accounting Chapter 3 - when cash is paid Not...

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Chapter 3: Operating Decisions and the Income statement I. The Operating cycle Operating (Cash to Cash cycle) time it takes for a company to pay cash to suppliers, sell goods & services to customers, and collect cash from customers (Refer to page 105 of Libby) II. Basis for Accounting 1. Cash basis revenues are recorded when cash is received and expenses are recorded
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Unformatted text preview: when cash is paid. ( Not useful for reporting to external users ) 2. Accrual basis records revenues when earned and expenses when incurred, regardless of the timing of cash receipts or payments ( GAAP requires to use this basis for financial reporting purposes )...
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