misstatements or omissions in financial statements reduce the reliability of information contained in them. Matching Concept: Matching Principle requires that expenses incurred by an organization must be charged to the income statement in the accounting period in which the revenue, to which those expenses relate, is earned. Prior to the application of the matching principle, expenses were charged to the income statement in the accounting period in which they were paid irrespective of whether they relate
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1. Is the Power Starterpack a multiple-element arrangement? According to ASC 605-25-05-1, a multiple-element arrangement is one in which a company "will perform multiple revenue-generating activities." In such an arrangement, a company provides multiple products or services, usually under a single contract. Often, a company will "transfer [those] deliverables to the customer and performance may occur at different times or over different periods of time" (ASC 605-25-05-2). Given these complexities
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Accounting Theory Case Study 10.2 Accounting for frequent flyer points: fact or fiction ? Maylinda Irmayanti (023111146) Windy Ayu Wulandari (023111239) Case Study 10.2 Accounting for frequent flyer points: fact or fiction? Accounting requirements under IFRS have changed the way airlines account for frequent flyer points. In the past, the cost/provision approach accounting practices were used. Under this method, the upfront sale of points to bank, credit
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recognition of revenue on straight line basis in the upstream case is also not appropriate. This is because there is no existence of vendor specific objective in this contract. According to the provisions of the modification of SOP 97 - 2 in AICPA statement of position no 98 - 9 , the residual method must exist as there is evidence of undelivered elements and therefore revenue recognition should be deferred . In this case the residual method
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1. Which of the four basic financial statements has three main sections: one dealing with operating expenses, another dealing with financial activities, and another dealing with investment activities? a. 0 Income statement b. 0 Retained earnings statement c. 0 Balance sheet d. 0 Statement of cash flows 2. Which of the following lists the main sections of the statement of cash flows? a. 0 Operations, investment, and credit activities b. 0 Investments, credit, and cash operations c. 0 Operations
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ch11 Student: ___________________________________________________________________________ 1. The three factors in cost allocation of a depreciable asset are service life, allocation base, and allocation method. True False 2. The physical life of a depreciable asset sets the lower limit of its service life. True False 3. Any method of depreciation should be both systematic and rational. True False 4. Total depreciation is the same over the life of an asset regardless of
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CHAPTER 18 REVENUE RECOGNITION MULTIPLE CHOICE—Conceptual AnswerNo.Description c1.Revenue recognition principle. b2.Definition of "realized." a3.Definition of "earned." d4.Recognizing revenue at point of sale. d5.Recording sales when right of return exists. c6.Revenue recognition when right of return exists. d7.Revenue recognition when right of return exists. b8.Appropriate accounting method for long-term contracts. c9.Percentage-of-completion method
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the amount of revenues and expenses to report in a given accounting period can be challenging. Proper reporting requires an understanding of the nature of the company’s business. Two principles are used as guidelines; they are the revenue recognition principle and the matching principle. The revenue recognition principle requires that companies recognize revenue in the accounting period in which it is earned. For example, in a service company, revenue is considered to be earned at the time the service
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Since S&H are getting cash for stamps issued to customers regardless of whether they are redeemed for goods later on (or not), the difference between the two is a major factor in their income and profitability. As we have learned, the realization principle is the concept that revenue can only be recognized once the underlying goods or services associated with the revenue have been delivered or rendered, respectively. Thus, revenue can only be recognized after it has been earned. In our case since we
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AccountingCoach.com/pro/ For personal use by the original purchaser only. Copyright © AccountingCoach®.com. Click a Category Below Financial Statements Balance Sheet Income Statement Cash Flow Statement Stockholders’ Equity Financial Ratios Accounting Principles Bookkeeping, Debits and Credits Accounting Equation Adjusting Entries Bank Reconciliation Petty Cash Accounts Receivable and Bad Debts Expense Inventory and Cost of Goods Sold Depreciation Accounts Payable Cost Behavior and Break-even Point Payroll
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