BU127 Chapter Notes - Chapter 3: Accrual
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BU127 Full Course Notes
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Bu-(cid:1005)(cid:1006)7 chapter (cid:1007): operati(cid:374)g decisio(cid:374)s a(cid:374)d the state(cid:373)e(cid:374)t of ear(cid:374)i(cid:374)gs. How business activities affect the statement of earnings. The operating cycle: the time it takes for a company to pay cash to suppliers, sell goods and services to customers, and collect cash from customers. The periodicity assumption: means that the long life of a company can be reported in shorter periods. Increases in assets or settlements of liabilities from ongoing operations. Operating expenses: decreases in assets or increases in liabilities to generate revenues during the period. Gross profit: net sales less cost of sales. Earnings from operations: gross profit less other operating expenses. Non-operating items: revenues or expenses that result fro(cid:373) activities that are(cid:374)"t part of ear(cid:374)i(cid:374)gs fro(cid:373) operations. Increases in assets or decreases in liabilities from peripheral transactions: decreases in assets or increases in liabilities from peripheral transactions. Earnings before income taxes: equals revenues minus all expenses except for income tax expense.