BU127 Chapter Notes - Chapter 3: Gross Profit, Accounts Receivable, Cash Cash
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BU127 Full Course Notes
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Document Summary
Chapter 3 operating decisions and the statement of earnings. The operating (cash-to cash) cycle is the time it takes for a company to pay cash to suppliers, sell goods and services to customers, and collect cash from customers. The periodic assumption means that the long life of a company can be reported in shorter periods. Revenues are increases in assets or settlements of liabilities from ongoing operations. Expenses are decreases in assets or increases in liabilities to generate revenues during the period. Cost of sales is the cost of products sold to customers. Operating expenses are usual expenses, other than cost of sales, that are incurred in operating a business during a specific accounting period. Gross profit (gross margin) is net sales less cost of sales. Earnings from operations (operating income) equals net sales less cost of sales and other operating expenses. Gains are increases in assets or decreases in liabilities from peripheral transactions.
