Conservative Recognition or Cookie Jar Reserves? A Case Study Analysis July 5, 2013 Case Summary: Nick O’Brian has just finished his college degree and has started working for his aunt’s software company, O’Brian Software. Nick was hired as a junior auditor and has only been on the job for a couple of months. His aunt Amelia started the company as a small firm many years ago and finally went public after the company had grown tremendously. She holds the CEO position and runs the bulk of
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Chapter 5 REVENUE AND MONETARY ASSETS Changes from Tenth Edition The chapter has been updated. The SEC’s SAB101 Revenue Recognition tests have been added. Approach The sequence of transactions for accounts receivable and bad debts often causes difficulty; indeed, the time that one is sometimes forced to spend on this topic is all out of proportion to its importance. Students often do not understand why an Allowance for Bad Debts account is necessary at all; they do not grasp the notion
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Revenue recognition – the accounting term for determining the amount of revenues to be “booked” for purposes of calculating a firm’s earnings in a given period – is an important, complex and controversial issue. The importance of revenue recognition stems from the accountant’s approach to calculating earnings, which is to first calculate recognized (“booked”) revenues, and then deduct the accounting costs of earning those revenues (a process known as “matching costs with revenues”). Consequently
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Chapter 5 REVENUE AND MONETARY ASSETS Changes from Tenth Edition The chapter has been updated. The SEC’s SAB101 Revenue Recognition tests have been added. Approach The sequence of transactions for accounts receivable and bad debts often causes difficulty; indeed, the time that one is sometimes forced to spend on this topic is all out of proportion to its importance. Students often do not understand why an Allowance for Bad Debts account is necessary at all; they do not grasp the notion
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ANALISYS FOR CONSERVATIVE RECOGNITION OR COOKIE JAR RESERVES Summary: O’Brian Software is a family software firm started by Amelia O’Brian. She started the company on a very small scale many years ago, but it has grown tremendously over time. The company went public and she now holds the position of chief executive officer at the company, while managing the majority of the business operations herself. Nick, who is Amelia’s nephew and a recent graduate with an accounting degree, began
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for revenue recognition. Sufficient evidence should support for the proposal to result in revenue being recognized over time. Also, there is chance that revenue could be recognized without the entity being reasonably assured to have a right to consideration. As is explained below, we have some disagreements. For 35(a), customer controls asset as it is created or enhanced. We partially agree with the concept of recognizing revenue over
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summarizes the operations (i.e.the activities) of an organization with a focus on its revenues, expenses, and profitability (Gapenski, pg. 74,2008). The income statement of Brandywine Homecare is presented in Table1: Brandywine Homecare Income Statement 2 Revenues: $12million
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earnings by manipulating the recognition of revenue. Among the most common methods of doing this are the bill-and-hold transaction and a long list of sham transaction involving shipping, billing and/or related-party involvements. Both the SEC and the AICPA seek to increase independent auditors' awareness of problems associated with these practices. Full Text: | Copyright American Institute of Certified Public Accountants Oct 1999 | [Headnote] Where there's revenue-recognition deviation, there could
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Jacqueline Mitchell 01/09/16 LP 2.1Assignment: Revenue Recognition Concepts questions b. What it means for a business recognizes revenue is to record sales for product and/or services in the general ledger and reported on the income statement every reporting period. Revenue should be recorded when earned. GAAP criteria for revenue recognition a transaction (sale) takes place and the amount is either paid at the time of purchase or collected based on terms set and with a certain degree of reliability
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Statement of the problem: Trans-Share Inc is a marketer and operator of the fractional interest aircraft programs. The company is planning to issue initial public offering which enables the company to adapt new accounting practices and can also reevaluate the past financial reports to make it in line with the newly chosen methodology. The challenge for the company is how to account for the revenue it earned through sales and subsequent of fractional interest. Current revenue recognition method: The
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