Exam 2 - ACCTG 326 ACTUAL UPDATED QUESTIONS AND CORRECT ANSWERS
Revenue Inflow of assets from delivering goods/services
ex) selling a hoodie for $100 ---> Revenue=$100
Revenue Recognition the process of determining when &how much revenue to record
ex)record hoodie when delivered, not paid
, Contract: agreement between a company and a customer that creates enforceable rights
ex)customer orders hoodie for $100
performance obligation: a promise to transfer a distinct good or service to a customer
ex) hoodie you promised to give
transaction price: amount of consideration a company expects to receive from a customer
ex)hoodie price is $100
allocation distributing the transaction price to each performance obligation based on
relative stand-alone selling prices (splitting prices between items)
recognized revenue: recording revenue when (or as) a performance obligation is satisfied (recording
revenue when you deliver)
ex)give hoodie-->record revenue
point in time revenue recognized at a single point when control transfers to the customer
(record all at once)
Overtime revenue recognizes as the performance obligation is satisfied over a period
(record little by little)
ex: year subscription ---> monthly revenue
deferred revenue a liability representing cash received before satisfying a performance obligation
ex: got paid but haven't delivered yet
accounts receivable an asset representing amounts owed by customers (money customers owe you)
ex)give hoodie now, paid later
variable consideration: a portion of the transaction price that depends on future events (price isn't fixed)
ex) bonus or discounts depend on future
constraint: limiting variable consideration to the amount that is probable not to result in
significant revenue reversal (only count extra money if you're pretty sure you'll get
it)
ex) only include bonus if likely
sales returns: reductions in revenue for estimated or actual returned goods (lower revenue
when items are returned)
ex)customer returns hoodie
Revenue Inflow of assets from delivering goods/services
ex) selling a hoodie for $100 ---> Revenue=$100
Revenue Recognition the process of determining when &how much revenue to record
ex)record hoodie when delivered, not paid
, Contract: agreement between a company and a customer that creates enforceable rights
ex)customer orders hoodie for $100
performance obligation: a promise to transfer a distinct good or service to a customer
ex) hoodie you promised to give
transaction price: amount of consideration a company expects to receive from a customer
ex)hoodie price is $100
allocation distributing the transaction price to each performance obligation based on
relative stand-alone selling prices (splitting prices between items)
recognized revenue: recording revenue when (or as) a performance obligation is satisfied (recording
revenue when you deliver)
ex)give hoodie-->record revenue
point in time revenue recognized at a single point when control transfers to the customer
(record all at once)
Overtime revenue recognizes as the performance obligation is satisfied over a period
(record little by little)
ex: year subscription ---> monthly revenue
deferred revenue a liability representing cash received before satisfying a performance obligation
ex: got paid but haven't delivered yet
accounts receivable an asset representing amounts owed by customers (money customers owe you)
ex)give hoodie now, paid later
variable consideration: a portion of the transaction price that depends on future events (price isn't fixed)
ex) bonus or discounts depend on future
constraint: limiting variable consideration to the amount that is probable not to result in
significant revenue reversal (only count extra money if you're pretty sure you'll get
it)
ex) only include bonus if likely
sales returns: reductions in revenue for estimated or actual returned goods (lower revenue
when items are returned)
ex)customer returns hoodie
