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Constructing an Income Statement

remember that the balance sheet and income statement are prepared using the accrual basis of accounting. The statement of cash flows is prepared using information from the accrual basis statements to tell what cash was received for and how cash was spent. The statement of cash flows classifies business transactions in to operating activities, investing activities, and financing activities.Accounting for Inventory – Measuring and ReportingIn order for any businesses to conduct daily activity, they will have to buy merchandise for their end users. There are a number of ways to account for the purchasing and integration of this merchandise within a business, and the decision on how a business entity will account for this from an accounting perspective rests on a number of factors. In this section of the course, you will be introduced to the inventory valuation concepts of FIFO – First in First Out and LIFO – Last in First Out, as well as the concept of weighted-average. Choosing an inventory valuation method is a major decision a merchandising business entity will have to make even before the merchandise is purchased; it is also a decision that dictates the valuation of the merchandise on hand within the business entity.