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Flashcards in General theory Deck (28)
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1
Q

Discount notatio

A

x/10 n/30

if paid within ten days x% off, must be paid within 30 days

2
Q

FoB destination

A

Seller pays freight expenses (belongs to seller until it arrives at destination)

3
Q

When receiving a discount amount saved…

ie from buyer’s perspective

A

goes into inventory (ex. I saved $7 on my car, that $7 is registered in inventory, why idk)

4
Q

When you need to pay something (ex. you paid w/ card)

A

accounts payable

5
Q

When you’ve been paid but haven’t earned it

A

Unearned Revenue

6
Q

Share capital

A

common shares

7
Q

Retained earnings go into…

A

Shareholder’s equity (SE)

8
Q

Increase right side/ decrease left side

A

debit

9
Q

increase left side/ decrease right side

A

credit

10
Q

Revenue can be recognized when

A
  • Performance has be completed
  • Revenue is measurable
  • Collection is reasonably certain
11
Q

expense recognition

A
  • when future economic value is diminished

- when assets decrease or liabilities increase

12
Q

accrual based accounting

A

expenses/revenue recorded when used/earned

13
Q

Cash based accounting

A

expenses/revenue recorded when cash used/received

note: this leads to misleading info

14
Q

Prepaid expenses (type of adjusting entry)

A

(prepayment) expense paid in cash and recorded as assets before they are used

15
Q

accrued expenses (adjusting entry)

A

expenses incurred but not yet payed

16
Q

Unearned revenue (adjst entry)

A

cash received and recorded as liability

17
Q

accrued revenues (adjusting entry)

A

Revenues earned, but not yet payed in cash

18
Q

Depreciation

A

allocating the cost of an asset over its expected lifetime

19
Q

What is an adjusting entry?

A

Journal entry made at the end of the cycle to match the matching principle

20
Q

what is the matching principle?

A

states that expenses need to match the revenue that is paying for them (in terms of dating)

21
Q

When does revenue occur? (4 things)

A
  • at point of sale (most of the time)
  • at completion of production (done in limited circumstances ex. w/ natural resources)
  • after sale (cash collection doubtful)
  • during construction (long projects)
22
Q

For long projects, two additional conditions for revenue recognition:

A
  1. presence of long-term, legally enforceable, contract

2. it is possible to estimate the percentage of completion (cost & revenues)

23
Q

using milestones to estimate revenue examples

A

of stories/floors, km of road built

24
Q

Cost incurred to total estimate cost revenue recognition is…

A

comparing the cost incurred at given moment to the estimated total cost (quote)
(note: if managers are making estimates, they can manipulate the revenue earned/expenses incurred)

25
Q

Contract-completed method

A

rarely used. revenue is only recognized after contract is completely met because on of the two long term conditions were not met.

26
Q

If payment is unreliable

A

Use installments and recognize as you go

27
Q

order of application for revenue recognition

A
  1. Identify contract
  2. identify obligations
  3. determine price
  4. allocate price
  5. recognize revenue (while following principles)
28
Q

If the buyer can walk away from long term project…

A

then revenue can only be recognized at the end

continuous production