Basic Concepts Flashcards
What are the elements of Relevance?
Predictive Value and Confirmatory Value
What are the elements of faithful representation?
Completeness, neutrality, and free from errors.
What are the elements of decision usefulness (they affect both Relevance and Faithful Representation)?
Comparability, Verifiability, Timeliness, and Understandability.
What is the cost recovery method?
The cost recovery method recognizes revenue only to the extent that the expenses recognized are recoverable.
How is deferred
Gross profit on installment sales calculated?
Gross profit is recognized only after sales are collected. Deferred gross profit is the total gross profit from the sale minus gross profit realized.
The first step is to calculate gross profit rate (gross profit/selling price). Gross profit is recognized as payments are received (GP rate x payment received)
