chapter 9: the income statement and the statement of cashflows Flashcards
what is revenue
generated when a form sells a product or service to a client or customer and receives cash, creates an account receivable, or satisfied an obligation
when is revenue realized?
when a product or service has been exchanged for cash, claims to cash, or asset that is readily convertible to a known amount of cash or claims (satisfaction based)
what is earned revenue?
when a firm has completed, or substantially completed, the activities it must perform to be entitled to the revenue benefit
what does net sales reflect
transactions price based on selling list, reduced by discounts, trade promotionals, and transaction fees
describe sales revenue and the affect on financial statements
revenue from selling and servicing activities is commonly recognized when the sale is made (product is delivered or service is provided); + cash or accounts receivable (balance sheet); +sales or service revenue (income statement)
what are sales returns
merchandise returned by the customer
what are sales allowances
a reduction in the amount owed by customer as a result of defective merchandise received
what are sale discounts
a reduction in the amount owed by the customer to encourage prompt payment on account
How are net sales derived?
Less: sales returns and allowances
Less: sales discount
describe FOB destination
seller owns the product until it is accepted by the buyer at the buyer’s designated location
describe FOB shipping point
buyer accepts ownership of the product at the seller’s shipping location
freight prepaid
paid by seller
freight collect
buyer pays the freight cost
what is often the most significant expense?
costs of goods sold
what is gross profit
the difference between sales revenue and cost of goods sold
