There are different aspects when working with financial statements. There are different financial statements within accounting. The balance sheet provides the overall picture for an organization, the income statement provides the list of revenue and expenses, the retained earnings statement appears on the balance sheet and income statement and the cash flow provides an indication on how much cash enters and leave an organization. The following paper will go further into the depths of accounting to explore the revenue recognition principle and expense recognition principal, along with the different types of revenues and expenses.
Revenue Recognition Principle The Financial Accounting Standard Board (FASB) along with “The International Accounting
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Recognize revenue when the entity satisfies each performance obligation
5. Recognize revenue when the entity satisfies each performance obligation
Expense Recognition Principle This principle has a requirement that equals expenses matching with revenue. The major issue is having a conclusive reasoning that expenses make its donation in regards to revenue. There are expectations that the matching of expenses and revenue is required in order for organizations to spawn revenue. Quintessential expense recognition should appear simultaneously as revenue recognition with which a disbursement is correlated with the matching principles.
Prepaid Expenses
One area that may require adjusted entries is prepaid expenses. Sometimes companies have expenses that are paid in advance, or they have payments that are made before services are rendered. These are called prepaid expenses or prepayments. An asset account increases when expenses are paid ahead of time (the asset account is debited). This will then reflect the service, or benefit to the company when they are received in the
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The supplies are used throughout the month, and then an inventory of what was actually used during that accounting period is recorded, as the supply expense for that specific accounting period. The reminder of the cost of the supplies, which were prepaid for, stays in the asset account. The next accounting period once again the adjusted entry will only show the amount for the specific supplies needed at that time. This would continue until all the supplies are accounted for, in adjusted entries throughout the year. (Kimmel
Accounts receivable ending balance= Beginning balance +sales on Account - cash receipts -sales returns and allowances- charge of uncollectible account
...-based, charge-based, and contractual payment systems. (p. 7). CRC Press. Retrieved from http://books.google.com/books?id=sCzhN9HruM0C&dq=fee schedule based payment&source=gbs_navlinks_s
The amount of the sales should also be fixed and determinable. The principle of revenue recognition also assumes that cash will be collected in a timely manner. This means that upon receiving payment for goods or service revenue should be recorded and in the case of prepaid expense revenue is recognized when it is earned. For example you have a year prepayment of rent each month and when the rent becomes due you will debit your rent account and credit your prepaid rent account, because then the rental payment would be earned/
The calculation of inventory expense on the operations statement and the posted balance on the statement of condition (balance sheet) may be approached in several different ways. List and discuss the various methods of inventory valuation that may be used. Indicate in your response why a certain method may be used in certain situations. What are predominant methods used in health care organizations (tax exempt or for profit)
Accrued expense is a liability that exists for a pending obligation that payment is due for goods or services that have been received. The cash will be paid in a latter accounting period when the payment amount w...
As we learned in class by keeping accounting on the simple way of a General ledger the entries goes as follows, every entry is A Debit for 1 account following with a credit on the other for Example when you have a Rent Expenses of $ 15,000 meaning you taking out money from cash account to p...
5 Recognition and Measurement in Financial Statements of Business Enterprises, revenue should not be recognized until they are realized or realizable (FASB, 1984). In other words, when revenues are recognized if they are realizable is when the stated assets have need received or they are readily held convertible to known figures. It is also stated that revenue can be recognized when it is earned. Accounting Standards Codification 606-10-25-1 states that an entity shall account for a contract with a customer that is within the scope of: the parties to the contract approving the contract (in writing, orally, or in accordance with other customary business practices) and are committed to perform their respective obligations, the entity can identify each party’s rights regarding the goods or services to be transferred, the entity can identify the payment terms for the goods or services to be transferred, the contract has commercial substance (that is, the risk, timing, or amount of the entity’s future cash flows is expected to change as a result of the contract), and it is probable that the entity will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer (FASB,
Other contributions for revenue may include foundation assistance grants, tax supports, and so on. The incoming revenues from these sources should be greater than or equal to the expenses, which is essential to financial viability (Cleverly & Cleverly, 2017, pp. 32-34).
The purpose of this article is to explain one important accounting principle which is the revenue recognition principle. As a reporter, this will help to analyze companies charged by the SEC for accounting schemes related to revenues and will allow you to ask more meaningful interview questions.
Revenue recognition is an accounting principle under generally accepted accounting principles (GAAP) that determines the specific conditions under which revenue is recognized or accounted for. Generally, revenue is recognized only when a specific critical event has occurred and the amount of revenue is measurable (Investopedia, 2017). The revenue recognition principle is a basis of accrual accounting together with the matching principle. They both determine the accounting period, in which revenues and expenses are recognized.
3. Supplies on hand: There is an increase in supplies on hand as of June 30 by $1,071. This could be the
Accounting: From Clay Tablets to the Cloud, How Technology has Changed the Accounting Profession Every business professional knows that accounting is the language of business. The language of business has especially been transformed in the last 38 years due to the almost constant change in technology and technology. Accounting professionals have become the interpreters for the language of business, a language that all business professionals must understand to be successful. in today’s highly competitive market.
The first conceptual framework for financial reporting was developed in the 1970s by the Financial Accounting Standards Board (FASB) in the US. The conceptual framework is a series of Statements of Financial Accounting Concepts (SFACs), taken as a whole, set the objectives, characteristics and other concepts that determine how financial information is measured and displayed in financial statements. In financial reporting, a conceptual framework is a theory of accounting prepared by a standard-setting body against which practical problems can be tested objectively. A conceptual framework deals with fundamental financial reporting issues. Accordingly, the International Accounting Standards Board (IASB) developed
Earnings management is a popular project that studied by fields of both economy and accounting. Although the concept of earnings management is still controversial in the accounting fields, the basic purpose can be concluded from the two authority definitions by Scott (n.d.) and Schipper (n.d.).
The revenue/cost period-: Revenue and the cost period in accounting that the company get income from normal business activities. It’s referred to normal business income that the company got by selling their product and service.