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17 Cards in this Set
- Front
- Back
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Core Revenue Recognition Principle |
companies recognize revenue when goods or services are transferred to customers for the amount the company expects to be receive in exchange for those goods or services |
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5 steps in Rev. Rec |
1. identify the contract with the customer 2. identify the performance obligations 3. determine the transaction price 4. allocate the transaction price for each performance obligations 5. Recognize revenue for each performance obligations |
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When are performance obligations satisfied |
when the sellers transfers control of goods or services to the customer |
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Performance obligations must be: |
distinct and separately identifiable |
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Billings account |
contra asset account needed so we don't double count our assets |
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What does GAAP require when there's a loss |
recognize entire amount of contract loss in the period it is going to happen |
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Principal vs Agent and rev. rec |
Principal- this is their primary business- uses Gross method because it shows more sales revenue Agent- intermediary- uses Net method |
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Channel stuffing |
sending more products to customers than they order to hype up revenue for the end of the year |
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GAAP requirements for right of return |
require that companies record something to show that customers have the right to return goods and maybe get a refund |
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Quality assurance warranty |
built in; included as cost of sale |
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extended warranty |
add-on |
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Why open a franchise |
already well known, less risk, help with location, advertising and training |
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How money today worth more than money tomorrow |
You can do something with the money now-invest |
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Discounting |
discount future amount back to find present amount- lowering the value |
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discount rate |
the interest rate you can earn on that money |
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ordinary annuity |
payment due at the end of the period |
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annuity due |
payment due at the beginning of the period |
