Chapter 18-Revenue Recognition Flashcards Preview

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Flashcards in Chapter 18-Revenue Recognition Deck (21)
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1

Account sales

A document a consignor periodically receives from the
consignee that shows the merchandise received, merchandise sold, expenses chargeable to the consignment, and the cash remitted.

2

Completion of production basis

The recognition of revenue at the completion of production even though no sale has been made (examples include precious metals or agricultural products with assured prices).

3

Completed-contract method

The accounting for long-term construction contracts where revenues and gross profit are recognized only when the contract is completed.

4

Consignment

A contractual arrangement whereby a consignor ships
merchandise to a consignee, who is to act as an agent for the consignor in selling the merchandise. The consignor retains title to the goods until the goods are sold.

5

Consignor

The party (generally a manufacturer) that sends goods to a consignee under consignment.

6

Consignee

The party (generally a dealer) that receives goods from a consignor under consignment.

7

Continuing franchise fees

The payments made by a franchisee to a franchisor for the continuing rights granted by the franchise agreement and for providing such services as management training, advertising and promotion, legal assistance, and other support.

8

Cost recovery method

Income is not recognized until cash payments by the buyer exceed the seller’s cost of the merchandise sold.

9

Cost-to-cost basis

The method used under the percentage-of-completion method whereby the percentage of completion is measured by comparing costs incurred to date with the most recent estimate of the total costs to complete the contract.

10

Deposit method

The seller reports cash received in advance as a deposit on the contract and classifies it as a liability (refundable deposit or customer advance).

11

Earned

Revenues are earned when the entity has substantially
accomplished what it must do to be entitled to the benefits represented by the revenues, that is, when the earnings process is complete or virtually complete.

12

Franchise

A contractual arrangement whereby a franchisor grants business rights and provides services to a franchisee who in return agrees to pay an initial franchise fee to operate a business and pay continuing fees based on the operations of the business.

13

Franchisee

The party who operates the franchised business.

14

Franchisor

The party who grants business rights under the franchise.

15

Initial franchise fee

Consideration for establishing the franchise relationship and providing some initial services.

16

Installment sales method

Income is recognized when it is collected rather than in the period of sale.

17

Percentage-of-completion method

The accounting for long-term construction contracts where revenues and gross profit are recognized each period based upon the progress of the construction, that is, the percentage of completion.

18

Realizable

Revenues are realizable when assets received in exchange are readily convertible to known amounts of cash or claims to cash.

19

Realized

Revenues are realized when goods and services are exchanged for cash or claims to cash (receivables).

20

Revenue recognition principle

The principle that provides that revenue is recognized when (1) it is realized or realizable and (2) it is earned.

21

Substantial performance

When the franchisor has no remaining obligation to refund any cash received or excuse any nonpayment of a note and has performed all the initial services required under the contract.