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 one of the steps used to apply the revenue recognition principle?

Calculate depreciation expense

Estimate the useful life of an asset

Record expenses when cash is paid

Identify the contract with a customer

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Verified step by step guidance

Understand the revenue recognition principle, which states that revenue should be recognized when it is earned and realizable, regardless of when cash is received.

Learn the five-step process for applying the revenue recognition principle, as outlined by accounting standards such as IFRS 15 and ASC 606.

Step 1 of the process is to identify the contract with a customer. A contract is an agreement between two or more parties that creates enforceable rights and obligations.

Ensure the contract meets specific criteria, such as approval by all parties, identification of rights and obligations, and the ability to measure payment terms.

Recognizing the contract is the foundation for subsequent steps, which include identifying performance obligations, determining transaction price, allocating the price to obligations, and recognizing revenue as obligations are satisfied.