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Chapter 3 book notes

Time period assumption

• Recognition issues – When should the effects of operating activities be recognized?
• Measurement issues – What amounts should be recognized?

Elements of the Income Statement:

• Multiple step – Income statements are recorded in multiple sections such as “operating income” and “income before taxes”.
• Revenues
• Expenses

Formulas:

1.  Asset Turnover Ratio

Key Terms:

1. Revenue Principle
2. Matching principle