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

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

For contracts that include more than one separate performance obligation, how should revenue be recognized according to the revenue recognition principle?

Revenue should be recognized evenly over the contract period, regardless of when obligations are satisfied.

Revenue should be recognized when cash is received, regardless of performance obligations.

Revenue should be allocated to each performance obligation and recognized as each obligation is satisfied.

Revenue should be recognized only when all performance obligations in the contract are fully satisfied.

Previous problemNext problem

Verified step by step guidance

Understand the concept of performance obligations: A performance obligation is a promise in a contract to transfer a good or service to a customer. Contracts may include multiple performance obligations, each requiring separate accounting treatment.

Review the revenue recognition principle: Revenue is recognized when it is earned and realizable, meaning the company has satisfied its performance obligations and the customer has received the promised goods or services.

Identify the separate performance obligations in the contract: Break down the contract into distinct promises to deliver goods or services. Each performance obligation should be treated independently for revenue recognition purposes.

Allocate the transaction price to each performance obligation: Use a fair value approach, such as the standalone selling price method, to assign a portion of the total contract price to each performance obligation.

Recognize revenue as each performance obligation is satisfied: For each obligation, revenue is recognized when control of the promised good or service is transferred to the customer, either at a point in time or over time, depending on the nature of the obligation.