Done 9

ch: 5-8

revenue recognition principle definition

This is a principle that says revenue must be recorded when goods are sold and given. The amount recorded is whatever is expected to be received.

FOB shipping point

Type of shipping where the title of the goods changes ownership at the shipping point, not the destination. In this case, the buyer is paying for the shipping.

FOB Destination

In this case the good are reconized as changing ownership once recieved by buyer. In this case the shipping is paid for by the seller.

Revenue recognition principle for bundled goods and Service (steps (5))

Gross Sales

All sales, cash and credit.

Net sales. (also what would reduce it?) Name min 3

The take-home after deducting the things that reduce revenue. Net Sales = Gross Sales − Sales Returns − Sales Allowances − Sales Discounts − Credit Card Discounts

What is a Note Recievable? when do you use it?

A promise from a customer to a buisness saying that they owe them money and they will be paying them back with intrest.

is inncured credit card charges like visa going to affect your net sales?

NOOOOO

What are items that will decrease net sales when calculating it because we know the formula is net sales= Gross profit - 1 -2 -3 (name 1 2 and 3)

Returns, allowances, and discounts.

which method is more accurate, and which one is easier? The aging of Whichaccounts receivable method? Or the percentage of total credit sales method?

The aging of accounts receiveable method is harder but more accurate and the percentage of total credit sales method is easier but less accurate.

what is netted against sales to get to net sales? (3)

credit card discounts, discounts, allowances and returns.

what is receivables turnover? How do you calculate it?

1. Receivables turnover measures how many times per year a company collects its average balance of accounts receivable.

2. You calculate it by dividing Net Credit Sales by the Average Accounts Receivable for the period.

3. A higher turnover means the company collects cash from customers quickly, which is great for cash flow.

4. A lower turnover means customers are paying slowly, which could signal collection problems or loose credit policies.

What are the two things a bank reconcilliation is supposed to do.

1. detect errors

2. Add items to your statement that werent recorded that were listed on the bank statment.

How do You calculate average cost?

You do Amount of goods avalible for sale divided by the number of goods you have.

What type of company uses retained earnings

Only corporations, sole proprieterships and partnerships dontproprietorships,