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

Under ASC Topic 606, which of the following is the first step in the revenue recognition process?

Determine the transaction price

Allocate the transaction price to the performance obligations in the contract

Recognize revenue when (or as) the entity satisfies a performance obligation

Identify the contract with a customer

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Verified step by step guidance

Understand that ASC Topic 606 outlines a five-step model for revenue recognition, which is designed to ensure consistent application across industries.

Step 1 in the revenue recognition process is to 'Identify the contract with a customer.' This involves determining whether an agreement exists between the entity and the customer that creates enforceable rights and obligations.

To identify the contract, ensure the following criteria are met: (a) the contract has been approved by all parties, (b) the rights of each party are identifiable, (c) payment terms are clear, (d) the contract has commercial substance, and (e) it is probable that the entity will collect the consideration due.

Once the contract is identified, subsequent steps in the revenue recognition process include identifying performance obligations, determining the transaction price, allocating the transaction price, and recognizing revenue as obligations are satisfied.

Remember that identifying the contract is foundational because it sets the stage for analyzing the transaction and applying the remaining steps of ASC Topic 606 effectively.