operations * Income from continuing operations includes the revenues, expenses, gains and losses that will probably continue in future periods. * In general, gains and losses result from changes in equity that do not result directly from operations but nonetheless are related to those activities. * INCOME TAX EXPENSE is shows as a separate expense in the income statement. * TAXABLE INCOME comprises revenues, expenses, gains, and losses as measured according to the regulations of
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off method is the practice of charging bad debts to expense in the period when individual invoices have been clearly identified as bad debts. The specific activity needed to write off an account receivable under the direct write off method with accounting software is to create a credit memo for the customer in question, which exactly offsets the amount of the bad debt. Creating the credit memo will involve a debit to a bad debt expense account and a credit to the accounts receivable account
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a five year period. Characteristics of a lease can be found in code ASC 840-20-25-1, which indicates that rent shall be charged to expense by the lessee and reported as income by the lessor over the lease term as it becomes receivable. However if collectability of assets received is doubtful, revenue may be recognized as cash is received instead of accruing revenues. As a lease, the purchase of the fractional interest in the airplane would not imply ownership. It would simply be considered prepaid
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flow diagram is labelled selling activities. In selling activities reporting consist of two elements, inflows and outflows. For the inflow: Revenue-the result from sale of goods and services to customers For the outflow: Expenses- the outflows that were made in order to generate these revenues Income is the amount by which revenues exceed expenses. Since the word income is often used with various qualifying adjectives, the term net income is used to refer
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bases of accounting When discussing the two different bases of accounting, accrual basis accounting and cash basis accounting, it is important to remember that the accrual basis of accounting agrees with both the matching principle and the revenue recognition principle, and that the cash basis of accounting violates both of these principles. Thus, of the two bases, only the accrual basis of accounting complies with generally accepted accounting principles. The basis of accounting utilized by a company
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letter to shareholders. When should an expenditure be recorded as an asset rather than an expense? 1. Always 2. If the amount is material. 3. When future benefit exists. 4. President's letter to shareholders Recognition of expense related to amortization of an intangible asset illustrates which principle of accounting? 1. Historical cost. 2. Expense recognition. 3. Full disclosure. 4. Revenue recognition. Allowing firms to estimate rather than physically count inventory at interim (quarterly)
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Service’s revenue and expense recognition policies, I have some recommendations to correct the mistakes that I have found in revenue and expenses. In the balance sheet, Commission Advance Receivable accounts represent current and long term asset but I think both accounts should be in neither a receivable nor a liability in financial statements. According to ASC 985-605-55-32 where the AICPA Task Force on revenue recognition issues effectively concluded that a receivable does not exist when revenue cannot
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equity and expenses decrease owners’ eq- Income Determination True-False 1. To measure earnings under accrual accounting, revenues are recognized when they are received. 2. Revenues are earned when the seller substantially completes performance required by an agreement. 3. The matching principle requires that expenses be recognized in the same period in which the revenues are recognized that were produced by the expenses. 4. Recognition of revenue under the cash basis occurs when the revenue is received
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Dell’s Accounting Policies for Revenues, Expenses and Net Income: Dell includes both GAAP and non-GAAP financial measures in its 10k reports. The company claims that excluding certain items GAAP gives managers a better grasp on the financial performance of the company. Dell excludes severance and facility actions, and acquisition related costs from its GAAP financial measures, and also the amortization of intangible assets. Dell acknowledges that its non-GAAP financial measures may not be
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include: recording revenue too soon; recording bogus revenue; boosting income using one-time or unsustainable activities; shifting current expenses to a later period; employing other techniques to hide expenses or losses; shifting current income to a later period and shifting future expenses to an earlier period. Recording Revenue Too Soon In order to shift revenue or gains in future-period to current period or to oversize bonuses and stock options, management may shift revenues or gains from future
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