BU127 Chapter 3: Chapter 3: Operating Decisions and the Statement of Earnings
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BU127 Full Course Notes
Verified Note
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Document Summary
Chapter 3: operating decisions and the statement of. The operating cycle (cash to cash), is the time it takes for a company to pay cash to suppliers, sell those goods and services to customers and collect cash from customers. Begin purchase or manufacture products or supplies on credit. Deliver product or provide service to customers on credit. The periodicity assumption- to meet the needs of decision makers, we report financial information for relatively short time periods, (monthly, quarterly, annually) Time period: the long life of a company can be reported over a series of shorter periods. Recognition issues: when should the effects of operating activities be recognized. The statement of earnings includes up to three major sections: Results of continuing operations: continuing operations profit= revenue-expenses+ gains- losses. Single step format- list all revenues followed by all expense items and then show the difference between revenue and expense.
