Accounting Chapter 3

Are the day-to-day functions involved in running a business: Buying goods and services from suppliers and employees, Selling goods and service to customers, and collecting and paying out cash

summarizes the financial impact of operating activities undertaken by the company during the accounting period: Primary source of revenues and expenses

Reports revenues when cash is received and expenses when cash is paid

Reports revenues when they are earned and expenses when they are incurred, regardless of the timing of payments

• Payment received in the same period as the goods or services are provided
• Payment received in the before period as the goods or services are provided 
• Payment received in the after period as the goods or services are provided

• 1. Risk and rewards have passed
• 2. Measurability is reasonably certain
• 3. Collectability is reasonably assured

• Occur a business receives cash before goods or services are provided
• A liability that represents a company's obligation to provide goods or services to the customers in the future

Under accrual basis accounting to record expenses in the same period as the revenues they generate, not necessarily the period in which cash is paid for them

• Payment is paid at the same time as the cost is incurred to generate revenue
• Payment is paid at the before time as the cost is incurred to generate revenue
• Payment is paid at the after time as the cost is incurred to generate revenue

Revenue (-DR/+CR/+SE)/ Expense (+DR/-CR/-SE)

is an internal report that lists all accounts and their balances to check on the equality of total recorded debits and total recorded credits

is a trial balance prepared before all final adjusting entries have been entered

• does not equal the amount of cash generated by the business
• does not always represent the change in a company's value
• May not be exact, because the income statement often contains estimates