corporate annual report. The balance sheet shows the financial position—assets, liabilities, and stockholders' equity—of the firm on a particular date, such as the end of a quarter or a year. The income statement presents the results of operations—revenues, expenses, net profit or loss and net profit or loss per share—for the accounting period. The statement of shareholders' equity reconciles the beginning and ending balances of all accounts that appear in the shareholders' equity section of the balance
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Revenue Recognition Dilemma U.S. GAAP Authoritative Guidance Accounting Standards Codification (ASC) 605-10-25-1 The recognition of revenue and gains of an entity during a period involves consideration of the following two factors, with sometimes one and sometimes the other being the more important consideration: a. Being realized or realizable. Revenue and gains generally are not recognized until realized or realizable. Paragraph 83(a) of FASB Concepts Statement No. 5, Recognition and Measurement
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are made after the preparation of financial statements. FALSE AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Easy Learning Objective: C2 6. Adjusting entries result in a better matching of revenues and expenses for the period. TRUE AACSB: Communications AICPA BB: Industry AICPA FN: Decision Making Difficulty: Easy Learning Objective: C2 7. Two main accounting principles used in accrual accounting are matching and full closure.
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owner or owners. Ans: True Difficulty: Easy LO: 1 3. The income statement is a financial statement that shows revenues earned and expenses incurred by a business over a specified period of time. Ans: True Difficulty: Easy LO: 1 4. Net income is the excess of expenses over revenues, whereas net loss is the excess of revenues over expenses. Ans: False Difficulty: Easy LO: 1 5. The natural business year for most businesses is always the same as the
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accrual basis would be businesses who recognize revenues earned, regardless if cash was received or not. The accrual basis also recognize when expenses are incurred, even if cash was not paid. The other potential option to the accrual basis is the cash basis. The major difference between the two accounting basis’, is that under the cash basis a business will record their revenue only at the time that cash is received. Additionally, they record expenses only when cash is received. For these reasons
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Principle. The matching principle states that expenses should be recognized and recorded when those expenses can be matched with the revenues those expenses helped to generate. In other words, expenses should not be recorded when they are paid. Expenses should be recorded as the corresponding revenues are recorded. This matches the revenues and expenses in a period. In this sense, the matching principle recognizes expenses as the revenue recognition principle recognizes income. Example Commission:
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$25 Referral Credit is recorded in Runway’s Income Statement — as a marketing expense. According to FASB Accounting Standard Codification, 605-50-45-1,“A vendor may give a customer a sales incentive or other consideration addresses the circumstances under which that consideration is either: • a. An adjustment of the selling prices of the vendor’s products or services and therefore characterized as a reduction of revenue when recognized in the vendor’s income statement • b. A cost incurred by the
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sales company Overstock.com in early 2009. Due to an accounting error, partners of the company were under billed by $1.8 million dollars over the course of 2008. Overstock chose to record this entry incorrectly which falsely ballooned the company’s revenues; in turn, causing them to record an incorrect profit of $1.0 million for the year ended December 31, 2008. Had this entry been booked correctly and within the guidelines of the generally accepted accounting principles (GAAP), Overstock would have
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Exposure Draft Accounting Standard (AS) 9 (Revised 20XX) (Corresponding to IAS 18) Revenue (Last date for Comments: June 07, 2010) Issued by Accounting Standards Board The Institute of Chartered Accountants of India 2 Exposure Draft Accounting Standard 9 (Revised 20XX) (Corresponding to IAS 18) Revenue Contents Objective Scope Definitions Measurement of revenue Identification of the transaction Sale of goods Rendering of services Interest, royalties and dividends Disclosure Effective
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the Coca Cola Company provides shows their strong leadership by the data they present. By discussions held in class it allows us to analyze the following detail: stockholders’ equity, dilutive securities and earnings per share, investments, revenue recognition, income taxes, pensions and postretirement benefits, leases, changes and error analysis, and cash flows. All numbers presented throughout this discussion are in millions. With respect to the Coca Cola statement, we have determined that
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