MAA103 Lecture Notes - Lecture 8: Income Statement, Financial Statement, Balance Sheet
Document Summary
Debits on the left, credits on the right. A retailer must purchase and sell inventory. A retail business has a current asset account called inventory or stock. There are 2 systems we use to account for inventory: the perpetual inventory system, the periodic inventory system. Cost of sales is not tracked at the point each inventory purchase and sale. Made easier with the use of bar codes, optical scanners and other computer devices and programs. Cogs is determined at time a sale occurs. Expensive system, not many small businesses use it of sales, calculated at the end of financial period. More suitable for small businesses cheaper. Under the accrual basis of accounting, transactions are recorded in the periods the events occur. The time period assumption assumes the economic life of a business can be divided into 2 artificial time periods: revenue recognition principle states. A time period less than a year is called an interim period.
