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28 Cards in this Set
- Front
- Back
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*Billings account |
Under the percentage-of-completion method, when a company records a receivable from a sale, it must subtract the balance from this account from Construction in Process to avoid double-counting inventory. |
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*completed-contract method |
Revenue recognition method in which companies recognize revenue and gross profit at a point in time—that is, when the contract is completed. Under this method, companies accumulate costs of long-term contracts in process, but they make no interim charges or credits to income statement accounts for revenues, costs, or gross profit. |
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*continuing franchise fees |
Payment received in return for the continuing rights granted by the franchise agreement and for providing such services as management training, advertising and promotion, legal assistance, and other support. |
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*franchisee |
The party who operates the franchised business. |
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*franchises |
Companies that derive their revenue from one or both of two sources: (1) from the sale of initial franchises and related assets or services, and (2) from continuing fees based on the operations of franchises. |
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*franchisor |
The party who grants business rights under the franchise. |
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*initial franchise fee |
Payment for establishing the franchise relationship and providing some initial services, such as employee and management training. |
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*input measures |
Measures of the extent of progress based on efforts devoted to the contract (costs incurred, labor hours worked, etc.). |
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*output measures |
Measures of the extent of progress based on results or achievements (tons of output, floors of a building completed, etc.). |
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*percentage-of-completion method |
Revenue recognition method in which companies recognize revenues, costs, and gross profit as progress is made toward completion on a long-term contract, using a basis or standard (such as the cost-to-cost basis) to measure the progress toward completion at interim dates. |
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asset-liability approach |
Under this approach, companies account for revenue based on the assets and liabilities arising from contracts with customers. |
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assurance-type warranty |
The warranty, included in the sales price of a company's product, that the product meets agreed-upon specifications in the contract at the time the product is sold. |
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bill-and-hold arrangement |
A contract under which a seller bills a customer for a product but the seller retains physical possession of the product until it is transferred to the customer at a point in time in the future. |
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consignee |
The dealer who acts as an agent for the consignor in selling the merchandise. |
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consignment |
Specialized type of marketing arrangement in which manufacturers (or wholesalers) deliver goods but retain title to the goods until they are sold. |
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consignor |
The manufacturer or the wholesaler who provides the consigned goods. |
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contract |
An agreement between two or more parties that creates enforceable rights or obligations. Contracts can be written, oral, or implied from customary business practice. |
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contract assets |
(1) Unconditional rights to receive consideration because the company has satisfied its performance obligation with a customer, and (2) conditional rights to receive consideration because the company has satisfied one performance obligation but must satisfy another performance obligation in the contract before it can bill the customer. |
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contract liability |
A company's obligation to transfer goods or services to a customer for which the company has received or will receive consideration from the customer. |
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contract modification |
Changes in the contract terms while the contract is ongoing. When this occurs, companies determine whether a new contract (and performance obligations) results or whether it is a modification of the existing contract. |
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performance obligation |
A promise in a contract to provide a product or service to a customer. This promise may be explicit, implicit, or possibly based on customary business practice. |
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principal-agent relationship |
When one party (agent) provides a selling service for another party (principal). Amounts collected on behalf of the principal are not revenue of the agent, e.g., when a travel agent sells airline tickets. |
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repurchase agreements |
Contracts that allow companies to transfer an asset to a customer but also give them the obligation or right to repurchase the asset at a later date. |
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revenue recognition principle |
One of the basic principles of accounting, which dictates that companies recognize revenue when the performance obligation is satisfied. |
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service-type warranty |
An additional warranty, not included in the sales price of the product, that the product meets agreed-upon specifications in the contract at the time the product is sold. A service-type warranty is recorded as a separate performance obligation. |
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transaction price |
The amount of consideration that a company expects to receive from a customer in exchange for transferring goods and services. |
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upfront fees |
Payments from customers before they receive a product or service. |
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warranties |
Assurances that the product meets agreed-upon specifications in the contract at the time the product is sold. |
