ACCT501_Chapter_4_Flashcards

Revenue

Inflows of economic benefits from a company’s ordinary operating activities.

Revenue Recognition

The process of determining when revenues are recognized, typically when performance obligations are satisfied.

Contract-based Approach

An approach to revenue recognition under IFRS, focusing on a company’s net position in a contract.

Earnings-based Approach

A revenue recognition approach under ASPE that emphasizes the recognition of revenue when earnings are realized.

Performance Obligation

A promise to transfer a distinct good or service to a customer as part of a contract.

Comprehensive Income

The total change in shareholders’ equity resulting from non-owner sources, including gains and losses not recognized in net income.

Single-step Statement of Income

A financial statement format where all revenues and gains are listed at the top followed by all expenses and losses

Multi-step Statement of Income

A financial statement format that separates operating revenues and expenses from non-operating revenues, expenses, gains, and losses.

Basic Earnings Per Share (EPS)

Expresses net income available to common shareholders on a per-share basis, calculated after deducting preferred dividends.

Right of Returns

An accounting consideration where companies must estimate the expected returns of sold goods.

Warranties

Assurances provided by a seller to a buyer that a product will work as intended, which can impact revenue recognition.

Consignment Sales

Sales arrangement where revenue is recognized only when the consigned goods are sold.

Third-Party Sale Arrangements

Sales agreements where companies act as agents and recognize revenue only for their commissions.