Accounting 2 - Revenues & Expenses - Realizing Revenues & Expenses Flashcards
Accrual accounting
Revenues and expenses are not necessarily recognized when cash is received or paid out.
Cash accounting
Revenues are recorded when cash is received and expenses are recorded when they are paid.
Conservatism concept
Increases in revenue are recorded only when there is reasonable assurance that payment will be received.
Realization concept
An increase to revenue isn?t recorded until the product (or service) has been delivered.
Deferred revenue
A liability account used when a customer has paid for a product or service, but the product or service has not yet been delivered
Expenses are recorded?
in the same accounting period as their associated revenues or in the accounting period(s) in which their benefits are used.
Expenditures:
Costs that are not expenses that either decrease assets or increase liabilities.
Unexpired expenditures
The benefits of the expenditures have not yet been realized.
Expired expenditures
The benefits of the expenditures have been used up. The expenditures are now expenses.
Allowance for Doubtful Accounts
Accountants preemptively estimate how much revenue will fail to be collected, or become bad debt.
The Allowance for Doubtful Accounts is?
subtracted from Accounts Receivable at the end of the accounting period.
Accounts Receivable
is an Asset
Allowance for Doubtful Accounts
is a Contra-asset
Bad Debt Expense
is an Equity
Deferred Revenue
is a Liability
