Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

3. Accrual Accounting Concepts

Revenue Recognition and Expense Recognition

Financial Accounting

3. Accrual Accounting Concepts

Revenue Recognition and Expense Recognition

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Multiple Choice

Which of the following is NOT one of the five steps in the revenue recognition process under the current accounting standards?

Identify the contract with a customer

Recognize expenses as incurred

Determine the transaction price

Allocate the transaction price to the performance obligations

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Verified step by step guidance

Step 1: Understand the revenue recognition process under current accounting standards, which is governed by the five-step model outlined in ASC 606 (IFRS 15). This model is designed to ensure revenue is recognized accurately and consistently.

Step 2: Review the five steps in the revenue recognition process: (1) Identify the contract with a customer, (2) Identify the performance obligations in the contract, (3) Determine the transaction price, (4) Allocate the transaction price to the performance obligations, and (5) Recognize revenue when (or as) the performance obligation is satisfied.

Step 3: Compare the options provided in the question to the five steps in the revenue recognition process. The options include: 'Identify the contract with a customer,' 'Recognize expenses as incurred,' 'Determine the transaction price,' and 'Allocate the transaction price to the performance obligations.'

Step 4: Note that 'Recognize expenses as incurred' is not part of the revenue recognition process. This phrase relates to expense recognition, which is a separate concept in accounting and not included in the five-step model for revenue recognition.

Step 5: Conclude that the correct answer is 'Recognize expenses as incurred,' as it does not belong to the five steps of the revenue recognition process under current accounting standards.