Accounting Dictionary of 4,000 US-GAAP Terms


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When goods or services have been transferred to a customer, but customer payment is contingent based on a future event, this amount is generally referred to as an unbilled receivable.


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Commonly referred to as deferred revenue or unearned revenue. On January 1, , an entity enters into a cancellable contract with a customer. The following journal entries are made to account for the contract:. Entity transfers the product to the customer on March 1, satisfying the performance obligation :. Assume the same facts in the previous example and additionally, the contract becomes non-cancellable on January 15, The following journal entries are made to account for the contract.


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On January 15, , the entity records a receivable as it has an unconditional right to consideration:. The contract requires Product 1 to be delivered first, and that payment will not be made until Service 1 is performed. On January 1, , an entity enters into a contract with a customer to transfer equipment and perform maintenance service for three years to a Customer.

Dictionary of Financial, Economic, and Business Terms

The equipment and the maintenance services are distinct performance obligations, and the maintenance part of the contract was deemed to be a stand-ready obligation. On January 31, and each month thereafter , the entity would recognize revenue for maintenance services as follows:. The entity would allocate cash to the satisfied performance obligations the equipment and the satisfied portion of the maintenance while recording the remaining consideration due associated with the satisfied performance obligation as an unbilled receivable.

Essentially not presenting a contract liability for maintenance paid for by the customer before performance. On January 31, and each month thereafter , the entity would record the following journal entry:. Contract assets and contract liabilities should be presented as current and noncurrent in a classified balance sheet, and determined at the contract level.

Usage of Accounting Information

Contract assets and liabilities for each performance obligation within a single contract should be reported on a net basis. Liabilities recorded for product returns and volume rebates should not be netted with contract liabilities or assets, as they represent a separate expectation i. Similarly, capitalized costs to obtain a contract should not be combined with contract assets.

Capitalized incremental costs to obtain a contract should be presented as a single asset and classified as long-term unless the original amortization period is one year or less. On January 1, , an entity enters into a cancellable contract with a customer. The following journal entries are made to account for the contract:.

Cash Vs. GAAP

Entity transfers the product to the customer on March 1, satisfying the performance obligation :. Assume the same facts in the previous example and additionally, the contract becomes non-cancellable on January 15, The following journal entries are made to account for the contract. On January 15, , the entity records a receivable as it has an unconditional right to consideration:.

The contract requires Product 1 to be delivered first, and that payment will not be made until Service 1 is performed. On January 1, , an entity enters into a contract with a customer to transfer equipment and perform maintenance service for three years to a Customer.

The equipment and the maintenance services are distinct performance obligations, and the maintenance part of the contract was deemed to be a stand-ready obligation. On January 31, and each month thereafter , the entity would recognize revenue for maintenance services as follows:.

Accounting Terminology Guide - Over 1, Accounting and Finance Terms

The entity would allocate cash to the satisfied performance obligations the equipment and the satisfied portion of the maintenance while recording the remaining consideration due associated with the satisfied performance obligation as an unbilled receivable. Essentially not presenting a contract liability for maintenance paid for by the customer before performance.

ADDITIONAL INFO

On January 31, and each month thereafter , the entity would record the following journal entry:. Contract assets and contract liabilities should be presented as current and noncurrent in a classified balance sheet, and determined at the contract level.

Financial Statement Fundamentals (5 of 39): IASB, FASB and Accounting Standards

Contract assets and liabilities for each performance obligation within a single contract should be reported on a net basis. Liabilities recorded for product returns and volume rebates should not be netted with contract liabilities or assets, as they represent a separate expectation i. Similarly, capitalized costs to obtain a contract should not be combined with contract assets. Capitalized incremental costs to obtain a contract should be presented as a single asset and classified as long-term unless the original amortization period is one year or less.

Generally, the amortization of costs of obtaining a contract that are capitalized should be amortized and reported as expense within the selling, general and administrative section of the income statement. ASC provides that incremental costs to obtain a contract that are incurred as a result of obtaining a contract should be capitalized and amortized over the life of the contract such costs may include sales commissions related to multiyear service contracts , if the entity expects to recover those costs.

Accounting Dictionary of 4,000 US-GAAP Terms Accounting Dictionary of 4,000 US-GAAP Terms
Accounting Dictionary of 4,000 US-GAAP Terms Accounting Dictionary of 4,000 US-GAAP Terms
Accounting Dictionary of 4,000 US-GAAP Terms Accounting Dictionary of 4,000 US-GAAP Terms
Accounting Dictionary of 4,000 US-GAAP Terms Accounting Dictionary of 4,000 US-GAAP Terms
Accounting Dictionary of 4,000 US-GAAP Terms Accounting Dictionary of 4,000 US-GAAP Terms
Accounting Dictionary of 4,000 US-GAAP Terms Accounting Dictionary of 4,000 US-GAAP Terms

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