Chapter 8 Test 1 Flashcards
Revenue Recognition, Receivables, and Advances from Customers
Multiple Deliverable Contract
Selling bundles of products and services
Accounts Receivable
is the amount on the sellers balance sheet owed by customers who have purchased goods and services on credit
Uncollectible Account
An account receivable that the seller never collects
Allowance Method
involves estimating the amount of uncollectible accounts receivable associated with credit sales. This is also a contra asset account (Allowance for uncollectible)
Accounts Receivable (Net) =
Accounts Receivable (gross) - Allowance for Uncollectibles
Control Account
Aggregates a group of like accounts i.e. Accounts Receivable
When a firm determines that a particular customer account is uncollectible, it removes that specific account, by debiting the allowance for uncollectible and crediting accounts receivable gross.
Write Off
When a firm determines that a particular customer account is uncollectible, it removes that specific account, by debiting the allowance for uncollectible and crediting accounts receivable gross.
Write Off
What are the two approaches management might use to estimate the amount of uncollectible accounts
- Percentage of sales Procedure
- Aging of accounts receivable procedures.
Installment Method
recognizes revenue as the seller collects cash from the customers
Gross Margin Percentage =
Gross Margin=
Gross Margin/Sales Revenue
Sales Revenue - Cost of Goods Sold
Cost Recovery Method
matches the costs of generating revenue with cash reciepts until the seller recovers all its costs.
Percentage of Completion Method
Recognizes a portion of the contract price as revenue during each period of construction or production
Construction in Progress
Inventory Account
Completed Contract Method
Also applies to long term construction contracts and sumilar contracts.
