Revenue & Expenses Flashcards
What is the five step proccess of revenue recognition
(COPAS)
Identify contract
Performance obligation
Transaction price
Allocate price to obligation
Recognize revenue as obligation is satisfied
How do you account for contracts partially fulfilled but not billable
Debit: Contract Asset
Credit: Revenue
When contract condition is fulfilled reverse contract asset for accounts receivable or cash
How do you recognize a contract with a contract asset of $250 billable from $50 of extra services performed
Debit: Accounts Receivable $300
Credit: Contract Asset $250, Revenue $50
How do you account for sale of a warranty on a transaction
Debit: Cash
Credit: Unearned Warranty Revenue, Sales
When do you recognize warranty revenue
At the end of the service period
Debit: Unearned Warranty Revenue
Credit: Warranty Revenue
What is the allowance for return account
A contra revenue account that offsets possible returns in a given period
How do you record allowance for return
How do you record the return of products
What expenses are inventoriable upon transferring inventory to consignee
Freight-in
How is sales revenue allocated for goods on consignment
Debit comission expense
Credit cash
How are royalties calculated
Sales * Royalty%
Non refundable tickets for event have revenue recognized when
When the services are performed
What conditions must be met to recognize revenue at a point in time
Answer (B): The performance of the entity creates or enhances an asset controlled by the customer is one of the criteria for recognizing revenue over time, not a point in time.
To recognize revenue at a point in time, the following criteria must be met:
- Entity currently has a right to collect payment for the asset
- The legal title for the asset is with the customer
- Physical possession of the asset is transferred by the entity to the customer
- Significant risks and rewards of ownership of the asset are with the customer
- Asset has been accepted by the custome
