BU127 Chapter Notes - Chapter 3: Deferred Income, Accrual, Asset
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BU127 Full Course Notes
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Revenues are defined as increases in assets or settlements of liabilities from ongoing operations of the business. Operating revenues result from the sale of goods or services. When revenues are earned, assets, usually cash or trade receivables, often increase. Deferred revenue is when a company receives cash in exchange for a promise to provide goods or services in the future. Expenses are decreases in assets or increases in liabilities from ongoing operations and are incurred to generate revenues during the period. An expenditure is any outflow of cash for any purpose, whether to buy equipment, pay off a bank loan, or pay employees their wages. An expense in more narrowly defined; it will only result when an asset, such as equipment or supplies, is used to generate revenue during a period, or when an amount is incurred to generate revenues during a period. Net earnings is the difference between revenues and expenses.