Revenue and Receivables Study Guide

These flashcards cover important vocabulary and concepts from revenue recognition, accounting methods, asset management, and financial statements.

Deferred Revenue

Liability representing an obligation to deliver goods or services in the future after cash has been received.

Accrual Accounting

Revenue is recognized when earned, and expenses are recognized when incurred, regardless of cash transactions.

Performance Obligation

A promise in a contract to transfer a good or service to a customer.

Net Revenues

Total revenues minus sales returns, allowances, and discounts.

Allowance for Uncollectible Accounts

An estimate of accounts receivable that may not be collected, required by GAAP.

Accounts Receivable Aging Method

A method for estimating uncollectible accounts based on the age of accounts receivable.

Bad Debt Expense

The expense recognized for accounts that are expected to be uncollectible.

Receivables Turnover Ratio

A measure of how efficiently a company collects cash from its credit sales.

LIFO (Last-In, First-Out)

An inventory valuation method where the latest items purchased are recognized as sold first.

FIFO (First-In, First-Out)

An inventory valuation method where the oldest items purchased are recognized as sold first.

Weighted Average Cost

An inventory valuation method that averages the cost of all similar items available for sale.

Cash Equivalents

Short-term, highly liquid investments that are readily convertible to cash.

Amortization

The process of gradually writing off the initial cost of an intangible asset over its useful life.

Intangible Assets

Assets that do not have physical substance and include items like patents, trademarks, and goodwill.

Gross Profit Ratio

The proportion of money left over from revenues after accounting for the cost of goods sold.

Cost of Goods Sold (COGS)

The direct costs attributable to the production of the goods sold by a company.

Interest Revenue

Income earned from interest on investments or savings.

Cash Equivalent Investments

Investments that can be quickly converted to cash, with high liquidity.

Interest Calculation Formula

P x R x T; where P is principal, R is the interest rate, and T is the time period in years.

Present Value

The current value of a future sum of money or stream of cash flows given a specified rate of return.

Future Value

The amount of money that an investment made today will grow to over time at a specific interest rate.

Capital Expenditures

Funds used by a company to acquire or upgrade physical assets such as property or equipment.

Double-Declining Balance Depreciation

An accelerated depreciation method that expenses more of an asset's cost earlier in its useful life.

Annuity

A series of equal payments made at regular intervals.

Gain on Sale of Asset

Occurs when the cash received from selling an asset exceeds its net book value.

Loss on Sale of Asset

Occurs when the cash received from selling an asset is less than its net book value.

Net Book Value

An asset's cost minus its accumulated depreciation.

Inventory Valuation

The method used to measure and report the value of inventory.

Service Revenue

Revenue earned from providing services to customers.

Investment

An asset acquired for generating income or appreciation.

Internal Development Costs

Costs incurred during the research and development phase of creating an intangible asset.

Trademarks

Symbols or phrases legally registered to represent a company or product.

Copyrights

Legal rights granted to creators of original works to control the use of their creations.

Franchises

Licenses granted to operate a business under a franchisor's brand and business model.

Goodwill

An intangible asset that arises when a buyer acquires an existing business, reflecting the brand value.

Sales Returns and Allowances

Reductions in sales revenue due to merchandise being returned or allowances given.

Discounts Offered

Price reductions to encourage the purchase of goods or services.

Operational vs Non-Operational Activities

Operating activities are related to the core business functions, while non-operating activities are incidental.

Inventory Accounting Methods

Procedures for valuing inventory and calculating COGS used by businesses.

Financial Statement Impact

The effect transactions have on a company's financial position and results.

Bad Debts

Accounts receivable amounts that are deemed uncollectible.