BU127 Chapter Notes - Chapter 3: Deferred Income, Retained Earnings, Accrual
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BU127 Full Course Notes
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The lower time it takes a firm to produce goods and sell them the higher net earnings it will have. Periodicity assumption: lon life of a company can be reported in shorter periods. When cash is given but the service has not been performed there is no revenue. Decreases in assets, increases in liabilities, expenses are different than expenditures. Expenses: all that a firm incurs in towards the generation of revenue like utilities and wages. 1. cos : cost of sales: cost of products sold to customer. 2. oe: operating expenses: usual expenses other than cost of sales. Earnings from operations = net sales - cos. 1. investment income: dividends or interest earned from excess cash investment. 3. gains or losses on disposal of assets: selling or abandoning property, plant & equipment. Gains: increases in assets or decreases in liabilities. Losses: decreases in assets or increases in liabilities. All are added to obtain earnings before tax.
