ACCT 5301 Lecture Notes - Revenue Recognition, Etsy, Operating Expense

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cheyannmiller

18 Nov 2022

School

Texas Tech University

Department

Accounting (Graduate Courses)

Course

ACCT 5301

Professor

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Document Summary

Module 5 revenues, recievables, and operating expenses. It is not necessary to receive cash to recognize revenue. Where does revenue go: revenue and expenses go on the income statement. Sales allowances: many companies offer customers a variety of sales allowances, rights of return, sales discounts for volume purchases, retailer promotions (point-of-sale price markdowns and other promotions, these reduce the amount of cash the company receives. Important to know because we still need to pay for utilities, salaries and expenses still! Accounts receivable!!: accounts receivable are reported on the balance sheet net of the allowance for doubtful (uncollectible) accounts, balance sheet an asset, accounts receivable affect cash flow because the product is sold but not paid. Insurance billing insurance can take anywhere from 90-120 days to pay you. If you report it as accounts receivable and you don"t consider doubtful accounts, you"re overstating your asset saying you have more assets than you really do which is illegal.

Related Questions

Consider the earnings process applying to a travel agent and anairline company and then defend the criteria for recognizingrevenue in each of the two cases.

A travel agent helps a customer purchase an airline ticket andrecognizes revenue for its commission at the point the customerpurchases the ticket. Some argue that revenue recognition isappropriate because the earnings process of the travelagentâhelping the customer make travel plans and arrangementsâislargely completed once the customer purchases the ticket. What doyou think?

In contrast, an airline that provides the same upfront servicewith its own in-house sales force cannot recognize revenue forthese services because the airlineâs earnings process is incompleteuntil the flight itself is provided.

crimsonant738

questions:

1. Generally, revenue from sales should be recognized at a pointwhen

Answer

management decides it is appropriate to do so.

the product is available for sale to the ultimate consumer.

the entire amount receivable has been collected from thecustomer and there remains no further warranty liability.

none of these.

2. What is the general approach as to when product costs arerecognized as expenses?

Answer

In the period when the expenses are paid.

In the period when the expenses are incurred.

In the period when the vendor invoice is received.

In the period when the related revenue is recognized.

3. Recognition of expense related to amortization of anintangible asset illustrates which principle of accounting?

Answer

Expense recognition.

Full disclosure.

Revenue recognition.

Historical cost.

4. Which accounting assumption or principle is being violated ifa company is a party to major litigation that it may lose anddecides not to include the information in the financial statementsbecause it may have a negative impact on the company's stockprice?

Answer

Full disclosure.

Going concern.

Historical cost.

Expense recognition.

5. Where is materiality not used in providingfinancial information?

Answer

Applying the revenue recognition principle.

Determining what items to include in the financialstatements.

Applying the going concern assumption.

Determining the level of disclosure.

apricotcrocodile918

10 Which of the following criteria is not a condition for the revenue recognition principle? a. The accounting entity receives the customer's payment in cash before revenue can be recognized b. The accounting entity has performed or substantially performed by providing goods or services to the customer c. In exchange for the accounting entity's performance the customer has promised to pay in cash or in a form and an amount that is measurable d. Where the accounting entity has received a promise to pay from its customer, collection is reasonably assured e. None of the above The correct answer is 'a'.

ACCT 5301 Lecture Notes - Revenue Recognition, Etsy, Operating Expense

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