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COMM 293 (15)
Chapter 3

Chapter 3 Notes (facc).doc
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Department
Commerce
Course
COMM 293
Professor
Patricia Mallia
Semester
Fall

Description
← Operating Cycle: • time it takes for a company to pay cash to suppliers, sell those goods and services to  customers, and collect cash from customers • periodicity assumption: o the long life of a company can be reported in shorter periods • Income Statement: o Continuing Operations:  2 formats:  single­step format, which lists all revenue items followed by all  expense items and then shows the difference b/w revenues and  expenses  multiple­step format, with cost of goods sold deducted from sales to  present gross profit as a subtotal.  other operating expenses are then  deducted to show operating profit as a second subtotal. o Revenues:  increases in assets or settlements of liabilities from ongoing operations o Expenses:  decreases in assets or increases in liabilities to generate revenues during the  period  cost of goods sold: • cost of products sold to consumers • difference b/w sales revenues and cost of goods sold is  gross profit  operating expenses: • usual expenses, other than cost of goods sold, incurred in  operating a business during a specific accounting period • selling expenses: o salaries and benefits to employees • general and administrative expenses: o salaries for employees who support the sales effort  such as legal counsel, accountants, and computer  technicians • depreciation and mortization : o cost of using long­term as buildings and equipment  that are used during the period • OPERATING INCOME: o net sales – cost of goods sold – other operating  expenses o Non­Operating Items:  investment income:  any interest or dividends earned on the investment  borrowing money:  a financing activity  using that money is called interest expense  peripheral transactions:
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