Term
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Definition
| Provide goods or services to customers in return for an asset (cash) |
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Term
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Definition
4 criteria that must be met for revenue to be recognized
1) Delivery of goods has occurred or a service has been rendered
2) Persuasive evidence of arrangement for customer payment
3) The price is fixed and determinable
4) Collection is reasonably assured
Revenue is NOT recognized when cash is received. |
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Term
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Definition
Use an asset to generate revenues, “incurred” when
1) an asset is used up
2) a service is provided to the company that must be paid for
Expenses are recognized when incurred, NOT when they are paid |
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Term
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Definition
| Expenses incurred to generate revenues must be recognized in the same period as the revenue |
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Term
| Accrual Basis of Accounting |
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Definition
| Revenues are recorded when earned and expenses are recorded when incurred. When the cash is received or paid DOES NOT Matter |
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Term
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Definition
| Sales price less the cost to buy or manufacture the goods sold This is the profit made from selling inventory only.This profit is used to pay operating expenses |
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Term
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Definition
Directly related to day to day business operations Related to:
1) Selling – sales employees, marketing, advertising
2) Administrative – expenses to run the organization
3) Research & Development – to develop new products
4) Restructuring of operations – to reduce future expenses |
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Term
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Definition
Sales less Cost of Goods Sold less Operating expenses
This is what is earned from day to day business that is expected to continue in the future as the business continues |
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Term
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Definition
the result of a transaction that is not part of your primary day to day business
Ex.
Interest expense: a cost of borrowing money
Gains/Losses: resulting from selling assets you no longer use or disposal or destruction of an asset
Rent Income: earn from leasing excess space, not your primary business
Interest income: earn from excess cash, not your primary business
Dividend income:earn from investing excess cash when investing is not your primary business |
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Term
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Definition
Reported separately. Not an expense that management
can control since it is government mandated. |
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Term
| Income from Continuing Operations |
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Definition
| An indication of income that can be earned in future years – used for trend analysis |
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Term
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Definition
Selling or disposing of a major part of the business
- product line -geographic area |
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Term
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Definition
| “Unusual and Infrequent” – not expected to happen again |
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Term
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Definition
| Total earnings of the company for this period |
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Term
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Definition
Revenues: record when cash is received for providing goods or services
Expenses: record when cash is paid for something provided to the company
- can be an asset or a service |
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Term
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Definition
Revenues: recorded when earned, the goods or services are provided
Expenses: recorded when incurred; use up an asset or a service was
provided to the company |
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