What is the revenue recognition principle?
Revenues are recognized in the accounting period in which the performance obligation is satisfied.
This principle ensures that revenue is recorded when the customer obtains control of the asset, reflecting the consideration expected in exchange for goods or services.
List the five steps of the revenue recognition standard.
- Identify the contract with a customer.
- Identify the separate performance obligations in the contract.
- Determine the transaction price.
- Allocate the transaction price to the separate performance obligations in the contract.
- Recognize revenue when or as each performance obligation is satisfied.
What is the expense recognition principle also known as?
The matching principle.
This principle states that expenses should be recognized during the period they contribute to revenue.
What are the three methods for recognizing expenses?
- Cause and effect
- Systematic and rational allocation
- Immediate recognition
Define gains in the context of financial accounting.
Increases in equity resulting from transactions that are not part of the company’s main or central operations.
Define losses in the context of financial accounting.
Decreases in equity resulting from transactions that are not part of the company’s main or central operations.
How are gains and losses from the disposal of fixed assets reported?
As a gain or loss on the income statement, based on the difference between the amount received for the sale and the book value of the fixed asset(s).
What are unusual gains and losses?
Gains and losses that are of an unusual nature or infrequent occurrence, reported as non-operating gains and losses within income from continuing operations.
What is included in income from continuing operations?
Revenue minus expenses from all ongoing business operations, including non-operating items and income taxes related to continuing operations.
What defines a discontinued operation?
A component or group of components of an entity that is either held for sale or has been disposed of, representing a strategic shift with a major effect on operations and financial results.
How is comprehensive income defined by the FASB?
The change in equity (net assets) of a business entity during a period from transactions and other events and circumstances from nonowner sources.
What is the formula for comprehensive income (loss)?
Net Income (Loss) + Other Comprehensive Income (∆ in Accumulated OCI)
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Accounting Foundations & Terminology46
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Recording Transactions & the Accounting Cycle13
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T-Accounts and Journalizing10
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Business Transactions in Practice14
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Trial Balances and Comprehensive Income6
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Subsidiary Ledgers and Revenue Examples24
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Advanced Transactions and Adjusting Entries21
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Adjusted Trial Balance to Year-End Close36
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Financial Statement Types and Elements28
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Statement of Cash Flows18
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Internal Controls18
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Managing Daily Finances45
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Valuing Assets, Liabilities & Equity42
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Revenue Recognition & Income Measurement12
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Financial Statement Analysis8
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Financial Ratios Overview43
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Budgeting Principles and Practices23
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Budgeting Methodologies and Cycles16
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Master Budget & Supporting Schedules24
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Cost Classifications & Costing Systems29
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Manufacturing Overhead and ABC22
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Variance Analysis23
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Performance Measurement & Decision Making27
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Business Ethics & Professional Conduct40
