Financial Accounting for Managers: Revenue and Receivables

These flashcards cover key vocabulary terms and concepts in financial accounting related to revenue recognition and receivables management.

Revenue Recognition

The principle that companies recognize revenue when goods or services are transferred to customers for the amount the company expects to receive.

Core Revenue Recognition Principle

Revenue is recognized at the time goods or services are transferred to customers for the expected amount.

Performance Obligation

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

Transaction Price

The amount of consideration to which an entity expects to be entitled in exchange for a good or service.

Unearned Revenue

Liability that represents a company’s obligation to provide goods or services in the future.

Net Revenues

Total revenues less any amounts for returns and discounts.

Allowance Method

A method for accounting for uncollectible accounts by estimating future bad debts and reporting them as a contra asset.

Bad Debt Expense

The estimated cost of accounts receivable that a company does not expect to collect during a given accounting period.

Percentage-of-Receivables Method

A method of estimating uncollectible accounts based on the percentage of accounts receivable expected not to be collected.

Direct Write-Off Method

An accounting method where bad debts are only written off at the time they become uncollectible.