BU127 Chapter 3: Chapter 3 BU127
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BU127 Full Course Notes
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Time it takes for company to pay cash to suppliers, sell those goods and services to customers, and collect cash from customers. Periodicity assumption: we report financial information for relatively short time periods (monthly, quarterly, etc. ) Results of continuing operations can be presented as. List all revenues followed by all expense items and then show the difference. Cost of goods sold are deducted from sales to present gross margin as a subtotal. Other operating expenses are then deducted to show operating earnings as a second subtotal. Goods are delivered / services are rendered. Neither continuing managerial involvement nor control over goods sold. Amount of revenue can be reliably measured. Cost in respect of the transaction can be measured reliably. Situation #1 - cash is received before revenue is earned. Cash is increased, liability account deferred revenue is increased e. g. advance rent, subscription, arline tickets. Situation #2 - cash is received as revenue is earned.
