Chapter 3 - Reporting operating results on the income statement. In the previous chapter, you learned how to analyze, record, and summarize the effects of transactions on balance sheet accounts. This chapter focuses on analyzing, recording, and summarizing the effects of operating transactions on balance sheet and income statement accounts. | Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Fundamentals of Financial Accounting 3e by Phillips, Libby, and Libby. Chapter 3 Reporting Operating Results on the Income Statement PowerPoint Authors: Susan Coomer Galbreath, ., CPA Charles W. Caldwell, ., CMA Jon A. Booker, ., CPA, CIA Fred Phillips, ., CA Chapter 3: Business Decision and Financial Accounting Operating Activities Operating activities include buying goods and services from suppliers and employees and selling goods and services to customers and then collecting cash from them. 3- Part I Operating activities are the day-to-day functions involved in running a business. Unlike the investing and financing activities in Chapter 2 that occur infrequently and typically produce long-lasting effects, operating activities occur regularly and often have a shorter duration of effect. Operating activities include buying goods and services from suppliers and employees and selling goods and services to customers and then collecting cash from them. Part II The period from buying goods and services through to collecting cash from customers is known as the operating cycle. This graphic illustrates the operating cycle for Pizza Aroma. Although most businesses have the same steps in their operating cycles, the length of time for each step varies from company to company. For example, Pizza Aroma usually collects cash from restaurant customers within minutes of making a sale, whereas a company like Kellogg’s might wait several weeks to collect on sales it makes to grocery stores. Operating activities are the primary source of revenues and expenses and, thus, can determine whether a company earns a profit (or incurs a loss). Income Statement Accounts 3- Part I Although a manager or owner may intuitively sense how the business is doing, a more reliable management approach is to evaluate the revenues and expenses reported on the income statement. This slide . | Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Fundamentals of Financial Accounting 3e by Phillips, Libby, and Libby. Chapter 3 Reporting Operating Results on the Income Statement PowerPoint Authors: Susan Coomer Galbreath, ., CPA Charles W. Caldwell, ., CMA Jon A. Booker, ., CPA, CIA Fred Phillips, ., CA Chapter 3: Business Decision and Financial Accounting Operating Activities Operating activities include buying goods and services from suppliers and employees and selling goods and services to customers and then collecting cash from them. 3- Part I Operating activities are the day-to-day functions involved in running a business. Unlike the investing and financing activities in Chapter 2 that occur infrequently and typically produce long-lasting effects, operating activities occur regularly and often have a shorter duration of effect. Operating activities include buying goods and services from suppliers and employees and
