Here are the journal entries to record the percentage of completion for the year ended December 31, 2010:
1) Costs incurred for year 2010: $500,000
DR: Construction in Process
CR: Cash
$500,000
$500,000
2) Compute % complete:
Costs incurred to date/Estimated total cost
$3,500,000/$4,000,000 = 87.5% complete
3) Revenue to recognize = Contract price x % complete
$8,400,000 x 87.5% = $7,350,000
4) Revenue for 2010 = Revenue to recognize - Revenue recognized in prior years
= $7,
This chapter discusses revenue recognition principles and guidelines. It covers recognition at the point of sale, before delivery for long-term contracts using the percentage-of-completion or completed-contract methods, and after delivery using installment, cost recovery or deposit methods. It also addresses departures from the sale basis, such as sales with buyback agreements or rights of return, and improper practices like trade loading and channel stuffing.
Different Definitions for Investment
Investment may be defined as……………….
“a commitment of funds made in the expectation
of some positive rate of return” OR
it can be defined as………………..
“a sacrifice of current money or other resources
for future benefits”.
The document provides information about the accounting cycle for Taposhi Corporation Ltd, including a trial balance, additional information, a 10-column worksheet, income statement, statement of owner's equity, and classified balance sheet. The worksheet adjusts account balances based on additional information and carries forward balances to the financial statements. The income statement shows net income of 20,500 Taka. The statement of owner's equity shows an increase in capital from opening to closing balance. The balance sheet presents assets, liabilities, and owner's equity as of December 31.
This document provides an overview of invoice and credit note processing in SAP Accounts Payable. It discusses the key differences between processing purchase order (PO) related and non-PO related invoices and credit memos. For PO related documents, it describes the 3-way matching process known as logistics invoice verification. It also reviews functions for reversing documents, changing documents, and displaying posted documents.
This document summarizes Accounting Standard 10 on Property, Plant and Equipment. It describes the objectives, scope, definitions and accounting treatment for PPE. Key points include: the standard establishes principles for recognition, measurement, presentation and disclosure of PPE; assets qualifying as PPE must be held for use in production or supply of goods/services and have a useful life of more than one year; PPE is initially measured at cost and subsequently using either the cost or revaluation model; depreciation is charged over the useful life of an asset using methods like straight line or diminishing balance; and gains or losses on disposal of PPE are included in profit or loss.
Ind AS 16 prescribes the accounting treatment for property, plant and equipment. The standard aims to provide information about an entity's investment in property, plant and equipment and the changes in such investment. It covers the recognition and measurement of property, plant and equipment, depreciation, and impairment losses. The principal issues are recognition of assets, determination of carrying amounts, depreciation charges, and impairment losses.
This document defines key terms related to revenue recognition under IFRS 15, including revenue, contracts, contract assets and liabilities. It then summarizes the 5-step model for recognizing revenue: 1) identify the contract, 2) identify separate performance obligations, 3) determine transaction price, 4) allocate price to obligations, 5) recognize revenue when obligations are satisfied. Examples are provided for determining variable consideration, allocating transaction price, and principal vs agent considerations. Revenue is recognized over time if criteria are met, otherwise at a point in time.
This document provides an overview of IND AS 103 on business combinations. It discusses the key principles, including:
1) All business combinations must be accounted for using the acquisition (purchase) method, which requires identifying an acquirer and measuring acquisition date fair values of the acquiree's assets and liabilities.
2) Goodwill arises when the consideration transferred exceeds the net fair values recognized and is not amortized but tested annually for impairment.
3) The acquirer recognizes the acquiree's identifiable assets, liabilities and contingent liabilities at their acquisition-date fair values. Any excess of cost over fair value is recognized as goodwill.
This chapter discusses revenue recognition principles and guidelines. It covers recognition at the point of sale, before delivery for long-term contracts using the percentage-of-completion or completed-contract methods, and after delivery using installment, cost recovery or deposit methods. It also addresses departures from the sale basis, such as sales with buyback agreements or rights of return, and improper practices like trade loading and channel stuffing.
Different Definitions for Investment
Investment may be defined as……………….
“a commitment of funds made in the expectation
of some positive rate of return” OR
it can be defined as………………..
“a sacrifice of current money or other resources
for future benefits”.
The document provides information about the accounting cycle for Taposhi Corporation Ltd, including a trial balance, additional information, a 10-column worksheet, income statement, statement of owner's equity, and classified balance sheet. The worksheet adjusts account balances based on additional information and carries forward balances to the financial statements. The income statement shows net income of 20,500 Taka. The statement of owner's equity shows an increase in capital from opening to closing balance. The balance sheet presents assets, liabilities, and owner's equity as of December 31.
This document provides an overview of invoice and credit note processing in SAP Accounts Payable. It discusses the key differences between processing purchase order (PO) related and non-PO related invoices and credit memos. For PO related documents, it describes the 3-way matching process known as logistics invoice verification. It also reviews functions for reversing documents, changing documents, and displaying posted documents.
This document summarizes Accounting Standard 10 on Property, Plant and Equipment. It describes the objectives, scope, definitions and accounting treatment for PPE. Key points include: the standard establishes principles for recognition, measurement, presentation and disclosure of PPE; assets qualifying as PPE must be held for use in production or supply of goods/services and have a useful life of more than one year; PPE is initially measured at cost and subsequently using either the cost or revaluation model; depreciation is charged over the useful life of an asset using methods like straight line or diminishing balance; and gains or losses on disposal of PPE are included in profit or loss.
Ind AS 16 prescribes the accounting treatment for property, plant and equipment. The standard aims to provide information about an entity's investment in property, plant and equipment and the changes in such investment. It covers the recognition and measurement of property, plant and equipment, depreciation, and impairment losses. The principal issues are recognition of assets, determination of carrying amounts, depreciation charges, and impairment losses.
This document defines key terms related to revenue recognition under IFRS 15, including revenue, contracts, contract assets and liabilities. It then summarizes the 5-step model for recognizing revenue: 1) identify the contract, 2) identify separate performance obligations, 3) determine transaction price, 4) allocate price to obligations, 5) recognize revenue when obligations are satisfied. Examples are provided for determining variable consideration, allocating transaction price, and principal vs agent considerations. Revenue is recognized over time if criteria are met, otherwise at a point in time.
This document provides an overview of IND AS 103 on business combinations. It discusses the key principles, including:
1) All business combinations must be accounted for using the acquisition (purchase) method, which requires identifying an acquirer and measuring acquisition date fair values of the acquiree's assets and liabilities.
2) Goodwill arises when the consideration transferred exceeds the net fair values recognized and is not amortized but tested annually for impairment.
3) The acquirer recognizes the acquiree's identifiable assets, liabilities and contingent liabilities at their acquisition-date fair values. Any excess of cost over fair value is recognized as goodwill.
Holding company accounts and consolidated Balance SheetAugustin Bangalore
1. The document discusses concepts related to holding companies including analysis of capital profits, calculation of capital reserve/goodwill, treatment of minority interest, and preparation of consolidated balance sheets.
2. Capital profits refer to profits of a subsidiary earned prior to acquisition by the holding company. Revenue profits are earned after the acquisition date.
3. In a consolidated balance sheet, common transactions between the holding company and subsidiary like bills receivable/payable are eliminated to show only balances with outside parties.
Analysis of Financial performance of Banks in Nepal Krishna Niraula
This document analyzes the financial performance of banking and financial institutions (BFIs) in Nepal over several years. It provides data on deposits, credits, interest rates, profits, capital adequacy, and other indicators. The Covid-19 pandemic impacted BFIs through decreased business, potential bad loans, and reduced profits. However, the Nepal Rastra Bank and Banking Association took steps like loan restructurings and relaxations to support BFIs. Opportunities for BFIs also emerged such as increased digital banking and opportunities in agriculture and small businesses to support economic recovery.
Solution Manual Advanced Accounting 9th Edition by Baker Chapter 12Saskia Ahmad
The document discusses issues related to multinational accounting and the translation of foreign entity financial statements. It provides answers to multiple questions covering topics such as the benefits of adopting international accounting standards, the structure and mission of the International Accounting Standards Board, the process for developing global standards, and methods for translating foreign entity financial statements into the parent company's reporting currency. Specifically, it addresses how to determine a foreign entity's functional currency, the difference between translation and remeasurement methods, how translation adjustments are recorded, and issues around consolidating foreign subsidiaries.
The document provides an overview of accounting for intangible assets under IAS 38. It discusses the definition of intangible assets, recognition criteria, measurement at cost or fair value, amortization of intangible assets with finite useful lives, impairment testing, and disclosure requirements. The document also covers topics such as government grants, internally generated intangible assets, revaluation model, and differences between IFRS and Indian GAAP treatment of intangible assets.
IFRS 3 establishes principles for accounting for business combinations. It requires acquirers to recognize identifiable assets acquired, liabilities assumed and any non-controlling interest at fair value. Goodwill is recognized as the excess of consideration transferred over the fair value of identifiable net assets. The acquisition method involves 4 steps - identifying the acquirer, determining the acquisition date, recognizing and measuring assets, liabilities and non-controlling interest, and recognizing and measuring goodwill or gain on bargain purchase. IFRS 3 also provides guidance on specific transactions like business combinations achieved in stages and accounting for acquisition costs.
Investasi pada Entitas Asosiasi dan Anak serta Properti InvestasiAyu Taseseb
Investasi pada entitas asosiasi dan anak dapat dilakukan melalui metode biaya untuk entitas asosiasi dan metode ekuitas untuk entitas anak. Properti investasi merupakan aset yang dimiliki untuk menghasilkan sewa atau kenaikan nilai. Akuntansi dan perlakuan pajak untuk transaksi-transaksi terkait investasi dan properti investasi dijelaskan.
This document discusses key aspects of activity-based management. It addresses two dimensions of activity-based management: the cost dimension, which focuses on accurate cost assignment, and the process dimension, which provides information on why work is done and how efficiently. A functional-based responsibility accounting system is also described and contrasted with an activity-based responsibility accounting system. Key differences include a shift in focus from responsibility centers to processes and teams in an activity-based system. The document also discusses various activity-based management concepts like driver analysis, activity analysis, value-added and non-value added activities, and performance measurement.
The document discusses the key aspects of accounting for borrowing costs as per Ind AS 23. It defines borrowing costs and qualifying assets. It covers the recognition, capitalization, suspension and cessation of capitalizing borrowing costs to qualifying assets. It also provides examples to illustrate the treatment of exchange differences and disclosures required.
This document summarizes IAS 40 on investment property. It defines investment property as property held to earn rentals or for capital appreciation rather than for use in production. It outlines the classification, recognition, measurement and disclosure requirements for investment property according to IAS 40, including initial measurement at cost and the option to use the fair value model or cost model for subsequent measurement. It also discusses transfers, disposals and specific disclosure requirements.
The document discusses dividend policy and its implications. It covers several key points:
1) Dividends are discretionary decisions made by the board of directors that balance returning cash to shareholders with retaining earnings for reinvestment.
2) There is a controversy around whether dividend policy impacts stock price, with some arguing it is irrelevant due to offsetting factors.
3) Other theories explore preferences for dividends versus capital gains and how signaling effects can influence perceptions.
This document provides an overview of IFRS 6, which specifies the financial reporting for exploration and evaluation of mineral resources. It discusses key aspects such as the objective, scope, recognition and measurement of exploration and evaluation assets, impairment testing, and disclosure requirements. Specifically, the standard aims to improve consistency and requires entities to assess exploration and evaluation assets for impairment using IAS 36 and disclose information to help users understand amounts and future cash flows from these assets.
Hi Everyone,
In this Powerpoint Presentation I have discussed about the Accounting Standard-10 on Property, Plant & Equipment issued by ICAI. I have covered all the major topics such as measurement of PPE, Depreciation(Which was previously covered under AS-6 now deleted), Initial Recognition, Subsequent Recognition etc.
This document discusses income escaping assessments and best judgment assessments under the Indian Income Tax Act. It provides an overview of the types of assessments, procedures for best judgment assessments, time limits, requirements for income escaping assessments, and key principles from judicial precedents. The key points are:
1) A best judgment assessment can be made if a taxpayer fails to file a return or comply with notices, and the assessment is made based on the assessing officer's best judgment using limited available materials.
2) An income escaping assessment can be made if the assessing officer has reason to believe income has escaped assessment, and notice must be issued and reasons recorded before such an assessment.
3) Time limits for completion of assessments are generally
Hybrid securities combine elements from multiple markets into a single security. They are constructed from "building blocks" of elemental markets like interest rates, foreign exchange, commodities, and equities. The creation of a hybrid security involves analyzing investor objectives, available elemental markets, derivative products, and regulatory considerations to develop a new product that balances these factors. Hybrid securities provide investors and issuers ways to access new opportunities, deal with constraints, and transfer risks between markets.
This document discusses accounting concepts related to merchandising operations and the multiple-step income statement. It defines key terms like cost of goods sold, gross profit, and profit margin ratio. It explains the differences between perpetual and periodic inventory systems, and how to record purchases, sales, returns, and discounts under each. The document also distinguishes between single-step and multiple-step income statements and discusses factors that affect profitability.
Intermediate Accounting . CH 18 . by MidoCoolMahmoud Mohamed
This document provides learning objectives and content on revenue recognition principles and methods. It discusses recognizing revenue at the point of sale, before delivery using the percentage-of-completion and completed contract methods, and after delivery using installment sales and cost recovery methods. It also addresses accounting for long-term contract losses and disclosure requirements.
This document discusses current liabilities and contingencies. It begins by defining a liability and current liability. Typical current liabilities include accounts payable, notes payable, current maturities of long-term debt, short-term obligations expected to be refinanced, dividends payable, customer advances and deposits, unearned revenues, sales taxes payable, and income taxes payable. It also identifies types of employee-related liabilities such as payroll deductions, compensated absences, and bonuses. Additionally, the document explains the classification of short-term debt expected to be refinanced and identifies types of gain and loss contingencies. It concludes by indicating how to present and analyze liabilities and contingencies.
Holding company accounts and consolidated Balance SheetAugustin Bangalore
1. The document discusses concepts related to holding companies including analysis of capital profits, calculation of capital reserve/goodwill, treatment of minority interest, and preparation of consolidated balance sheets.
2. Capital profits refer to profits of a subsidiary earned prior to acquisition by the holding company. Revenue profits are earned after the acquisition date.
3. In a consolidated balance sheet, common transactions between the holding company and subsidiary like bills receivable/payable are eliminated to show only balances with outside parties.
Analysis of Financial performance of Banks in Nepal Krishna Niraula
This document analyzes the financial performance of banking and financial institutions (BFIs) in Nepal over several years. It provides data on deposits, credits, interest rates, profits, capital adequacy, and other indicators. The Covid-19 pandemic impacted BFIs through decreased business, potential bad loans, and reduced profits. However, the Nepal Rastra Bank and Banking Association took steps like loan restructurings and relaxations to support BFIs. Opportunities for BFIs also emerged such as increased digital banking and opportunities in agriculture and small businesses to support economic recovery.
Solution Manual Advanced Accounting 9th Edition by Baker Chapter 12Saskia Ahmad
The document discusses issues related to multinational accounting and the translation of foreign entity financial statements. It provides answers to multiple questions covering topics such as the benefits of adopting international accounting standards, the structure and mission of the International Accounting Standards Board, the process for developing global standards, and methods for translating foreign entity financial statements into the parent company's reporting currency. Specifically, it addresses how to determine a foreign entity's functional currency, the difference between translation and remeasurement methods, how translation adjustments are recorded, and issues around consolidating foreign subsidiaries.
The document provides an overview of accounting for intangible assets under IAS 38. It discusses the definition of intangible assets, recognition criteria, measurement at cost or fair value, amortization of intangible assets with finite useful lives, impairment testing, and disclosure requirements. The document also covers topics such as government grants, internally generated intangible assets, revaluation model, and differences between IFRS and Indian GAAP treatment of intangible assets.
IFRS 3 establishes principles for accounting for business combinations. It requires acquirers to recognize identifiable assets acquired, liabilities assumed and any non-controlling interest at fair value. Goodwill is recognized as the excess of consideration transferred over the fair value of identifiable net assets. The acquisition method involves 4 steps - identifying the acquirer, determining the acquisition date, recognizing and measuring assets, liabilities and non-controlling interest, and recognizing and measuring goodwill or gain on bargain purchase. IFRS 3 also provides guidance on specific transactions like business combinations achieved in stages and accounting for acquisition costs.
Investasi pada Entitas Asosiasi dan Anak serta Properti InvestasiAyu Taseseb
Investasi pada entitas asosiasi dan anak dapat dilakukan melalui metode biaya untuk entitas asosiasi dan metode ekuitas untuk entitas anak. Properti investasi merupakan aset yang dimiliki untuk menghasilkan sewa atau kenaikan nilai. Akuntansi dan perlakuan pajak untuk transaksi-transaksi terkait investasi dan properti investasi dijelaskan.
This document discusses key aspects of activity-based management. It addresses two dimensions of activity-based management: the cost dimension, which focuses on accurate cost assignment, and the process dimension, which provides information on why work is done and how efficiently. A functional-based responsibility accounting system is also described and contrasted with an activity-based responsibility accounting system. Key differences include a shift in focus from responsibility centers to processes and teams in an activity-based system. The document also discusses various activity-based management concepts like driver analysis, activity analysis, value-added and non-value added activities, and performance measurement.
The document discusses the key aspects of accounting for borrowing costs as per Ind AS 23. It defines borrowing costs and qualifying assets. It covers the recognition, capitalization, suspension and cessation of capitalizing borrowing costs to qualifying assets. It also provides examples to illustrate the treatment of exchange differences and disclosures required.
This document summarizes IAS 40 on investment property. It defines investment property as property held to earn rentals or for capital appreciation rather than for use in production. It outlines the classification, recognition, measurement and disclosure requirements for investment property according to IAS 40, including initial measurement at cost and the option to use the fair value model or cost model for subsequent measurement. It also discusses transfers, disposals and specific disclosure requirements.
The document discusses dividend policy and its implications. It covers several key points:
1) Dividends are discretionary decisions made by the board of directors that balance returning cash to shareholders with retaining earnings for reinvestment.
2) There is a controversy around whether dividend policy impacts stock price, with some arguing it is irrelevant due to offsetting factors.
3) Other theories explore preferences for dividends versus capital gains and how signaling effects can influence perceptions.
This document provides an overview of IFRS 6, which specifies the financial reporting for exploration and evaluation of mineral resources. It discusses key aspects such as the objective, scope, recognition and measurement of exploration and evaluation assets, impairment testing, and disclosure requirements. Specifically, the standard aims to improve consistency and requires entities to assess exploration and evaluation assets for impairment using IAS 36 and disclose information to help users understand amounts and future cash flows from these assets.
Hi Everyone,
In this Powerpoint Presentation I have discussed about the Accounting Standard-10 on Property, Plant & Equipment issued by ICAI. I have covered all the major topics such as measurement of PPE, Depreciation(Which was previously covered under AS-6 now deleted), Initial Recognition, Subsequent Recognition etc.
This document discusses income escaping assessments and best judgment assessments under the Indian Income Tax Act. It provides an overview of the types of assessments, procedures for best judgment assessments, time limits, requirements for income escaping assessments, and key principles from judicial precedents. The key points are:
1) A best judgment assessment can be made if a taxpayer fails to file a return or comply with notices, and the assessment is made based on the assessing officer's best judgment using limited available materials.
2) An income escaping assessment can be made if the assessing officer has reason to believe income has escaped assessment, and notice must be issued and reasons recorded before such an assessment.
3) Time limits for completion of assessments are generally
Hybrid securities combine elements from multiple markets into a single security. They are constructed from "building blocks" of elemental markets like interest rates, foreign exchange, commodities, and equities. The creation of a hybrid security involves analyzing investor objectives, available elemental markets, derivative products, and regulatory considerations to develop a new product that balances these factors. Hybrid securities provide investors and issuers ways to access new opportunities, deal with constraints, and transfer risks between markets.
This document discusses accounting concepts related to merchandising operations and the multiple-step income statement. It defines key terms like cost of goods sold, gross profit, and profit margin ratio. It explains the differences between perpetual and periodic inventory systems, and how to record purchases, sales, returns, and discounts under each. The document also distinguishes between single-step and multiple-step income statements and discusses factors that affect profitability.
Intermediate Accounting . CH 18 . by MidoCoolMahmoud Mohamed
This document provides learning objectives and content on revenue recognition principles and methods. It discusses recognizing revenue at the point of sale, before delivery using the percentage-of-completion and completed contract methods, and after delivery using installment sales and cost recovery methods. It also addresses accounting for long-term contract losses and disclosure requirements.
This document discusses current liabilities and contingencies. It begins by defining a liability and current liability. Typical current liabilities include accounts payable, notes payable, current maturities of long-term debt, short-term obligations expected to be refinanced, dividends payable, customer advances and deposits, unearned revenues, sales taxes payable, and income taxes payable. It also identifies types of employee-related liabilities such as payroll deductions, compensated absences, and bonuses. Additionally, the document explains the classification of short-term debt expected to be refinanced and identifies types of gain and loss contingencies. It concludes by indicating how to present and analyze liabilities and contingencies.
Dokumen tersebut membahas tentang pengakuan pendapatan, termasuk:
1. Prinsip-prinsip pengakuan pendapatan yaitu manfaat ekonomi akan mengalir ke perusahaan dan manfaat tersebut dapat diukur secara andal.
2. Pengakuan pendapatan pada saat penjualan, penyimpangan dari dasar penjualan, dan pengakuan pendapatan kontrak jangka panjang.
3. Metode pengukuran pendapatan seperti metoda angs
Dokumen tersebut membahas tentang pengakuan pendapatan untuk kontrak konstruksi jangka panjang dengan dua metode, yaitu metode persentase penyelesaian dan metode kontrak selesai. Metode persentase penyelesaian mengakui pendapatan secara proporsional selama proses produksi berdasarkan tingkat penyelesaian fisik atau biaya. Sedangkan metode kontrak selesai hanya mengakui pendapatan pada saat penyelesaian kontrak. Dokumen ini jug
The document discusses accounting for equity. It covers:
1. The key components of equity including contributed capital, retained earnings, and treasury shares.
2. The accounting procedures for issuing shares, whether par value or no-par shares, including allocation of proceeds when shares are issued with other securities.
3. Accounting for shares issued in non-cash transactions, using either the fair value of assets received or shares issued, whichever can be determined more reliably.
Equity
(c) Share premium—ordinary Share premium
(d) Treasury shares Contra equity
(e) Share capital—preference Share capital
(f) Share premium—preference Share premium
19. The main factors that influence a company's dividend policy are:
- Earnings and cash flows - A company needs sufficient earnings and cash flows to pay dividends.
- Growth opportunities - Companies with good investment opportunities may retain more earnings.
- Financial flexibility - Companies need to maintain financial flexibility to fund operations.
- Shareholder preferences - Some shareholders prefer dividends while others prioritize capital gains.
- Industry practices - Companies follow industry norms and peer practices regarding dividends.
- Tax considerations
"[Ringkuman]"
Dokumen tersebut membahas akuntansi untuk sekuritas dilutif dan perhitungan laba per saham. Secara khusus, dibahas mengenai akuntansi untuk obligasi konversi, saham preferen konversi, berbagi waran, dan rencana kompensasi saham. Juga dijelaskan perhitungan laba per saham untuk struktur modal yang sederhana dan kompleks.
The document discusses various concepts related to revenue recognition including definitions of income, revenue, and gains according to accounting standards. It explains that revenue can be recognized at different points in a company's operating cycle such as during production, delivery of goods, or receipt of cash/orders. The timing of revenue recognition depends on factors like transfer of risks/rewards of ownership and reliability of measurement. Revenue from long-term construction contracts is recognized using the percentage-of-completion method under certain conditions.
The document discusses accounting for pensions and postretirement benefits. It distinguishes between accounting for an employer's pension plan versus a pension fund. It identifies types of pension plans such as defined-benefit and defined-contribution plans. It also explains how to calculate pension expense and amortize gains and losses. Financial statement reporting requirements for pension plans are described. Differences between accounting for pensions versus postretirement healthcare benefits are identified.
Dokumen tersebut membahas tentang pedoman pengakuan pendapatan dan pengukuran pendapatan berdasarkan standar akuntansi, termasuk ketika pendapatan dapat diakui, metode pengukuran pendapatan untuk kontrak jangka panjang, dan pengakuan kerugian kontrak.
This presentation shows the use of the reciprocal allocation method in order to overcome one of the main problems of the departmental cost allocation method in the field of management accounting.
Dokumen tersebut membahas tentang laporan laba rugi komprehensif dan laporan perubahan ekuitas. Terdiri dari tujuan pembelajaran yang meliputi pemahaman kegunaan dan keterbatasan laporan laba rugi komprehensif, format, pengungkapan, dan informasi yang terkandung dalam laporan-laporan tersebut. Juga dijelaskan tentang elemen-elemen laporan laba rugi komprehensif seperti penghasilan, beban, laba rugi, dan pendap
This document summarizes key points from a lecture on accounting for income tax in accordance with PSAK 46. It discusses temporary and permanent differences between pre-tax income and taxable income, and how these lead to deferred tax assets or liabilities. Examples are provided to illustrate deferred tax calculations for temporary differences that arise over multiple years. The document also covers topics like current and deferred tax expense/revenue, loss carryforwards, and implications of changes in tax rates.
The document discusses various accounting concepts and methods related to revenue recognition. It covers:
1) The operating cycle of receiving cash from customers, purchasing materials, converting materials to products, storing products, selling products, and receiving cash again.
2) Basic revenue recognition criteria of recognizing revenue when an entity has substantially performed what is required to earn income and the amount can be reliably measured.
3) Methods of revenue recognition including delivery of goods or services, consignment, franchise fees, percentage of completion for long-term contracts, and completed contracts.
4) Factors that determine the amount of revenue recognized such as net realizable value, direct write-off vs allowance methods for uncollectible accounts
This document outlines standards for revenue recognition under AS 9. It defines revenue and lists criteria for recognizing revenue from the sale of goods, services, construction contracts, installment sales, and interest/royalties/dividends. Revenue is recognized when it is earned and realized, such as when goods are transferred or services rendered. Construction revenue can be recognized using the percentage of completion or completed contract method. Expenses are costs associated with generating revenue for a period. Gains arise from incidental transactions and are recognized upon realization, though unrealized holding gains may be recognized in some cases.
Here are some key points about FI organizational structure in SAP:
- The top level entity is the client, which represents the company.
- Below the client is the operating concern, which represents the legal entity or group. There can be multiple operating concerns under a client.
- Controlling areas are used to separate responsibilities for planning, budgeting, reporting etc. There can be multiple controlling areas under an operating concern.
- Company codes represent individual companies or plants. They are the lowest level for accounting and are mandatory.
- Business areas can be used to separate divisions, regions etc. for reporting. Multiple business areas can be assigned to a company code.
- Profit centers can be used below
Identify the reporting and disclosure requirements of ASC 606
Implement Contracts reporting to meet 606 objectives
Assess your financial position, performance per Contracts metrics
The document discusses revenue recognition standards. It defines revenue as income from ordinary business activities like sales, fees, interest and dividends. Revenue is recognized when earned and realized/realizable, such as when goods/services are exchanged for cash. For long-term contracts, revenue can be recognized using percentage-of-completion or completed contract methods depending on certainty of costs and contract terms.
The audit program summarizes procedures to audit accounts receivable and sales transactions. It includes analytical procedures to identify fluctuations, confirmation of receivable balances, testing of the aging report and allowance for doubtful accounts, cutoff testing around the balance sheet date, and procedures to identify related party transactions. If there are fraud risks, additional procedures are recommended such as expanding confirmations and checking for altered documents.
Certain transactions affect the revenue or expenses of two or more accounting periods.
The purpose of adjusting entries is to assign to each accounting period appropriate amounts of revenue and expense.
The document provides an overview of IFRS 15 Revenue from Contracts with Customers and IAS 2 Inventories. It begins with introducing the background issues around revenue recognition and measurement of inventories. Then it discusses IFRS 15 in more detail, outlining its objective and scope, key definitions, and the five-step model for recognizing revenue. The five-step model includes identifying the contract, performance obligations, transaction price, allocating the price to obligations, and recognizing revenue. An example is provided to illustrate identifying performance obligations. In summary, the document explains the standards around revenue and inventories and how IFRS 15 established principles for revenue recognition.
This document discusses the accounting standard AS 9 on revenue recognition. It provides definitions for key terms like revenue, gain, and income. Revenue is recognized when risks and rewards of ownership are transferred and the amount can be measured reliably. For services, revenue can be recognized using the percentage of completion or completed contract method. Revenue from interest, royalties, and dividends is recognized on an accrual basis. However, revenue recognition may be postponed if there is uncertainty in collection or other risks. The standard specifies different recognition criteria for domestic versus foreign revenue sources.
Accounting Standard 9 provides guidance on revenue recognition. It defines revenue as the gross inflow of cash from the sale of goods and services or use of enterprise assets. Revenue is recognized when it is earned and realized or realizable. For sales of goods, revenue is recognized at the point of sale. For services, revenue is recognized as services are performed or completed. Revenue from the use of assets is recognized as time passes. There are specific rules for long-term construction contracts and transactions where collectability is uncertain.
This document discusses key accounting concepts and conventions. It defines 8 accounting concepts: business entity, money measurement, accounting period, accounting cost, going concern, dual aspect, realization, and matching. It also discusses 4 accounting conventions: consistency, materiality, conservatism, and full disclosure. The concepts and conventions establish standard principles and practices for preparing accurate financial statements and reports.
study objectivesAfter studying this chapter, you should be a.docxhanneloremccaffery
study objectives
After studying this chapter, you should be able to:
1 Explain the revenue recognition principle and the expense
recognition principle.
2 Differentiate between the cash basis and the accrual basis of
accounting.
3 Explain why adjusting entries are needed, and identify the
major types of adjusting entries.
4 Prepare adjusting entries for deferrals.
5 Prepare adjusting entries for accruals.
6 Describe the nature and purpose of the adjusted trial balance.
7 Explain the purpose of closing entries.
8 Describe the required steps in the accounting cycle.
9 Understand the causes of differences between net
income and cash provided by operating activities.
chapter
ACCRUAL ACCOUNTING
CONCEPTS
4
● Scan Study Objectives
● Read Feature Story
● Scan Preview
● Read Text and Answer
p. 175 p. 180 p. 185 p. 189
● Work Using the Decision Toolkit
● Review Summary of Study Objectives
● Work Comprehensive p. 197
● Answer Self-Test Questions
● Complete Assignments
● Go to WileyPLU S for practice and tutorials
● Read A Look at I FR S p. 224
● the navigator
Do it!
Do it!
✓
162
c04AccrualAccountingConcepts.qxd 8/3/10 1:50 PM Page 162
feature story
163
The accuracy of the financial reporting system de-
pends on answers to a few fundamental questions. At
what point has revenue been earned? At what point
is the earnings process complete? When have ex-
penses really been incurred?
During the 1990s, the stock prices of dot-com com-
panies boomed. Many dot-com companies earned most
of their revenue from selling advertising
space on their websites. To boost re-
ported revenue, some dot-coms began
swapping website ad space. Company
A would put an ad for its website on company B’s web-
site, and company B would put an ad for its website on
company A’s website. No money ever changed hands,
but each company recorded revenue (for the value of
the space that it gave up on its site). This practice did
little to boost net income and resulted in no additional
cash flow—but it did boost reported revenue. Regula-
tors eventually put an end to the practice.
Another type of transgression results from compa-
nies recording revenue or expenses in the wrong year.
In fact, shifting revenues and expenses is one of the
most common abuses of financial accounting. Xerox
admitted reporting billions of dollars of lease revenue
in periods earlier than it should have been reported.
And WorldCom stunned the financial markets with its
admission that it had boosted net income by billions
of dollars by delaying the recognition of expenses un-
til later years.
Unfortunately, revelations such as
these have become all too common in
the corporate world. It is no wonder that
the U.S. Trust Survey of affluent Ameri-
cans reported that 85 percent of its respondents be-
lieved that there should be tighter regulation of finan-
cial disclosures, and 66 percent said they did not trust
the management of publicly traded companies.
W.
Topic 8 audit of revenue & receipts cycle + acc receivable (1)sakura rena
This document discusses the audit of the revenue and receivables cycle. It covers the key accounts, classes of transactions, business functions, documents, internal controls, and substantive audit procedures for accounts receivable. The accounts receivable audit procedures aim to verify that receivables are complete, accurate, properly classified, recorded in the correct period, stated at their realizable value, and that presentation and disclosures conform to GAAP requirements. Tests of details for receivables include confirmation with customers, footing trial balances, testing supporting documentation for transactions, and evaluating allowance for doubtful accounts.
This document discusses various tax considerations related to managerial decisions such as expenses allowed as deductions, treatment of losses, replacement of assets, make or buy decisions, sale of assets used for scientific research, and owning or leasing assets. It provides details on tax provisions and calculations for comparing options. For example, when deciding between owning and leasing an asset, it recommends calculating the present value of post-tax cash outflows for both options and selecting the one with the lower present value. The document also includes an example problem comparing the options of purchasing an asset with borrowed funds versus leasing it.
This document provides an overview of International Accounting Standard 18 which establishes principles for recognizing revenue. The standard defines revenue and specifies that revenue should be measured at fair value. It provides criteria for when revenue from the sale of goods or services is recognized, including when risks and rewards transfer to the buyer. The standard also addresses revenue recognition from interest, royalties and dividends.
Sage Intacct Presentation - Moving from Order Entry to Contractsndhsshare1
Dear Colleague,
We were thankful for the opportunity to present at the 2018 Sage Intacct Advantage conference. We compared order entry to contract management systems, showing the capability of the latter to manage continuous workflow, subscription billing, and meet ASC 606 compliance requirements. Creating business value through automation, simplification, and options for enterprise-wide visibility.
Available for your consideration, and one-on-one review with our team.
Sincerely,
Seth Pomeroy, Partner, NDH
312.461.0505
seth@ndhcpa.com
This presentation is based on the subject Financial Accounting which helps the beginners to know the basic concept of accounting . This is according to the syllabus of Pt. Ravishankar University , Raipur and Durg University, Durg.
Construction contract_Existing and Proposed Accounting StandardsAdi Iskandar Iliyas
The slides contained information gathered from accounting standards applicable to construction contract as well as some examples on disclosures by Malaysian companies.
The slides were co-prepared by fellow classmates, whose name appears in the 1st slide.
This document provides an introduction to basic accounting principles. It discusses how accounting involves systematically recording all business transactions and defines bookkeeping as the process of recording these transactions. Accounting is then defined as the analysis and interpretation of the bookkeeping records to prepare financial statements.
Several key accounting terms are defined, including assets, equity, capital, liability, revenue, and expenses. The accounting cycle is described as the process of initially recording transactions in a journal, transferring them to ledger accounts, preparing a trial balance, and ultimately final accounts and a balance sheet. Finally, the document discusses accounting assumptions like going concern and accrual basis, and different systems for recording transactions like single and double entry.
The document discusses accounting standards for revenue recognition. It defines revenue and the principles of revenue recognition, which are that revenue is recognized when it is earned and realized or realizable. There are four types of revenue transactions and revenue can be recognized at the point of sale or before delivery using different methods like percentage-of-completion for long-term contracts. Revenue recognition may also occur after delivery using installment sales or cost recovery methods depending on whether collection is reasonably assured.
GraphSummit Singapore | The Art of the Possible with Graph - Q2 2024Neo4j
Neha Bajwa, Vice President of Product Marketing, Neo4j
Join us as we explore breakthrough innovations enabled by interconnected data and AI. Discover firsthand how organizations use relationships in data to uncover contextual insights and solve our most pressing challenges – from optimizing supply chains, detecting fraud, and improving customer experiences to accelerating drug discoveries.
Full-RAG: A modern architecture for hyper-personalizationZilliz
Mike Del Balso, CEO & Co-Founder at Tecton, presents "Full RAG," a novel approach to AI recommendation systems, aiming to push beyond the limitations of traditional models through a deep integration of contextual insights and real-time data, leveraging the Retrieval-Augmented Generation architecture. This talk will outline Full RAG's potential to significantly enhance personalization, address engineering challenges such as data management and model training, and introduce data enrichment with reranking as a key solution. Attendees will gain crucial insights into the importance of hyperpersonalization in AI, the capabilities of Full RAG for advanced personalization, and strategies for managing complex data integrations for deploying cutting-edge AI solutions.
Unlocking Productivity: Leveraging the Potential of Copilot in Microsoft 365, a presentation by Christoforos Vlachos, Senior Solutions Manager – Modern Workplace, Uni Systems
Building Production Ready Search Pipelines with Spark and MilvusZilliz
Spark is the widely used ETL tool for processing, indexing and ingesting data to serving stack for search. Milvus is the production-ready open-source vector database. In this talk we will show how to use Spark to process unstructured data to extract vector representations, and push the vectors to Milvus vector database for search serving.
Removing Uninteresting Bytes in Software FuzzingAftab Hussain
Imagine a world where software fuzzing, the process of mutating bytes in test seeds to uncover hidden and erroneous program behaviors, becomes faster and more effective. A lot depends on the initial seeds, which can significantly dictate the trajectory of a fuzzing campaign, particularly in terms of how long it takes to uncover interesting behaviour in your code. We introduce DIAR, a technique designed to speedup fuzzing campaigns by pinpointing and eliminating those uninteresting bytes in the seeds. Picture this: instead of wasting valuable resources on meaningless mutations in large, bloated seeds, DIAR removes the unnecessary bytes, streamlining the entire process.
In this work, we equipped AFL, a popular fuzzer, with DIAR and examined two critical Linux libraries -- Libxml's xmllint, a tool for parsing xml documents, and Binutil's readelf, an essential debugging and security analysis command-line tool used to display detailed information about ELF (Executable and Linkable Format). Our preliminary results show that AFL+DIAR does not only discover new paths more quickly but also achieves higher coverage overall. This work thus showcases how starting with lean and optimized seeds can lead to faster, more comprehensive fuzzing campaigns -- and DIAR helps you find such seeds.
- These are slides of the talk given at IEEE International Conference on Software Testing Verification and Validation Workshop, ICSTW 2022.
Essentials of Automations: The Art of Triggers and Actions in FMESafe Software
In this second installment of our Essentials of Automations webinar series, we’ll explore the landscape of triggers and actions, guiding you through the nuances of authoring and adapting workspaces for seamless automations. Gain an understanding of the full spectrum of triggers and actions available in FME, empowering you to enhance your workspaces for efficient automation.
We’ll kick things off by showcasing the most commonly used event-based triggers, introducing you to various automation workflows like manual triggers, schedules, directory watchers, and more. Plus, see how these elements play out in real scenarios.
Whether you’re tweaking your current setup or building from the ground up, this session will arm you with the tools and insights needed to transform your FME usage into a powerhouse of productivity. Join us to discover effective strategies that simplify complex processes, enhancing your productivity and transforming your data management practices with FME. Let’s turn complexity into clarity and make your workspaces work wonders!
AI 101: An Introduction to the Basics and Impact of Artificial IntelligenceIndexBug
Imagine a world where machines not only perform tasks but also learn, adapt, and make decisions. This is the promise of Artificial Intelligence (AI), a technology that's not just enhancing our lives but revolutionizing entire industries.
Maruthi Prithivirajan, Head of ASEAN & IN Solution Architecture, Neo4j
Get an inside look at the latest Neo4j innovations that enable relationship-driven intelligence at scale. Learn more about the newest cloud integrations and product enhancements that make Neo4j an essential choice for developers building apps with interconnected data and generative AI.
Unlock the Future of Search with MongoDB Atlas_ Vector Search Unleashed.pdfMalak Abu Hammad
Discover how MongoDB Atlas and vector search technology can revolutionize your application's search capabilities. This comprehensive presentation covers:
* What is Vector Search?
* Importance and benefits of vector search
* Practical use cases across various industries
* Step-by-step implementation guide
* Live demos with code snippets
* Enhancing LLM capabilities with vector search
* Best practices and optimization strategies
Perfect for developers, AI enthusiasts, and tech leaders. Learn how to leverage MongoDB Atlas to deliver highly relevant, context-aware search results, transforming your data retrieval process. Stay ahead in tech innovation and maximize the potential of your applications.
#MongoDB #VectorSearch #AI #SemanticSearch #TechInnovation #DataScience #LLM #MachineLearning #SearchTechnology
GraphRAG for Life Science to increase LLM accuracyTomaz Bratanic
GraphRAG for life science domain, where you retriever information from biomedical knowledge graphs using LLMs to increase the accuracy and performance of generated answers
In his public lecture, Christian Timmerer provides insights into the fascinating history of video streaming, starting from its humble beginnings before YouTube to the groundbreaking technologies that now dominate platforms like Netflix and ORF ON. Timmerer also presents provocative contributions of his own that have significantly influenced the industry. He concludes by looking at future challenges and invites the audience to join in a discussion.
Best 20 SEO Techniques To Improve Website Visibility In SERPPixlogix Infotech
Boost your website's visibility with proven SEO techniques! Our latest blog dives into essential strategies to enhance your online presence, increase traffic, and rank higher on search engines. From keyword optimization to quality content creation, learn how to make your site stand out in the crowded digital landscape. Discover actionable tips and expert insights to elevate your SEO game.
Observability Concepts EVERY Developer Should Know -- DeveloperWeek Europe.pdfPaige Cruz
Monitoring and observability aren’t traditionally found in software curriculums and many of us cobble this knowledge together from whatever vendor or ecosystem we were first introduced to and whatever is a part of your current company’s observability stack.
While the dev and ops silo continues to crumble….many organizations still relegate monitoring & observability as the purview of ops, infra and SRE teams. This is a mistake - achieving a highly observable system requires collaboration up and down the stack.
I, a former op, would like to extend an invitation to all application developers to join the observability party will share these foundational concepts to build on:
Pushing the limits of ePRTC: 100ns holdover for 100 daysAdtran
At WSTS 2024, Alon Stern explored the topic of parametric holdover and explained how recent research findings can be implemented in real-world PNT networks to achieve 100 nanoseconds of accuracy for up to 100 days.
Threats to mobile devices are more prevalent and increasing in scope and complexity. Users of mobile devices desire to take full advantage of the features
available on those devices, but many of the features provide convenience and capability but sacrifice security. This best practices guide outlines steps the users can take to better protect personal devices and information.
National Security Agency - NSA mobile device best practices
Marley- Kieso ch 18 revenue recog
1. Intermediate Accounting
Intermediate Accounting
November 16th, 2010
November 16th, 2010
1.
General Course Questions
2.
Columbia Sportswear Annual Report Project Questions
3.
Chapter 18 Revenue Recognition (using assigned homework)
A. Two Conditions for Revenue Recognition (question 2)
B. Departures from the Point of Sale Basis (question 6)
C. Long term Construction Contracts (?7 & 9, BE 2,3,4,Prob 6)
D. Installment Sales & Cost Recovery (BE 7,8,9, 10)
E. Cost Recovery (BE 10)
4.
Discussion Question #4 Revenue Recognition
5.
Return and Review Ch 7 quiz – cash & receivables
1
2. Revenue Recognition
Revenue should be recognized at the soon as what TWO
conditions are met:
1.
2.
Revenue should be recognized when you have ______ the
W______ & P_______ is assured.
Question 2
2
3. Revenue Recognition Classified by
Type of Transaction
Chapter 18
Type of
Transaction
Description of
Revenue
Timing of
Revenue
Recognition
Sale of product
from inventory
Revenue from
sales
Date of sale
(date of
delivery)
Chapter 18
Chapter 14 & others
Chapter 10
Rendering a
service
Permitting use
of an asset
Sale of asset
other than
inventory
Revenue from
fees or services
Revenue from
interest, rents,
and royalties
Gain or loss on
disposition
Services
performed and
billable
As time passes
or assets are
used
Date of sale or
trade-in
3
4. Timing of Revenue Recognition
I. Revenue is normally recognized at the point of sale,
provided:
A. Revenue can be reasonably ___________, collectibility
of the sales price is reasonably assured or the amount
uncollectible can be ___________ reasonably.
B. The earnings process is _______; the seller is not
obligated to perform significant activities after the sale.
II. Earlier recognition is appropriate if there is a high
degree of certainty about the amount of revenue earned.
III. Delayed recognition is appropriate if the
degree of uncertainty concerning the amount of
revenue or costs is sufficiently high or
sale does not represent substantial completion of
the earnings process.
4
5. Timing of Revenue Recognition
I. Revenue is normally recognized at the point of sale,
provided:
A. Revenue can be reasonably measured, collectibility of
the sales price is reasonably assured or the amount
uncollectible can be estimated reasonably.
B. The earnings process is complete; the seller is not
obligated to perform significant activities after the sale.
II. Earlier recognition is appropriate if there is a high
degree of certainty about the amount of revenue earned.
III. Delayed recognition is appropriate if the
degree of uncertainty concerning the amount of
revenue or costs is sufficiently high or
sale does not represent substantial completion of
the earnings process.
5
7. Departures from the Sale BasisSale Basis
Departures from the Point of
A. Sales with Buyback Agreements - even though title has
transferred, if the seller still has the risk of ownership it is not a
sale.
B. Sales When Right of Return Exists - do not record the
sale unless all of the following six provisions are met: (question 6)
1. Sellers _____ is known (fixed or determinable at the date of sale)
2. Buyer's payment is not contingent upon the ______ of product
3. The buyer's obligation is not altered if product is _____/______
4. Buyer is a separate ______ from seller
5. Seller is not obligated to help buyer _______the product
6. Future returns can be _________
C. Trade Loading and Channel Stuffing - practices to book
tomorrows revenues today, need to be discouraged.
7
8. Departures from the Sale BasisSale Basis
Departures from the Point of
A. Sales with Buyback Agreements - even though title has
transferred, if the seller still has the risk of ownership it is not a
sale.
B. Sales When Right of Return Exists - do not record the
sale unless all of the following six provisions are met:
1. Sellers price is known (fixed or determinable at the date of sale)
2. Buyer's payment is not contingent upon the resale of product
3. The buyer's obligation is not altered if product is stolen/damaged
4. Buyer is a separate entity from seller
5. Seller is not obligated to help buyer resell the product
6. Future returns can be estimated
C. Trade Loading and Channel Stuffing - practices to book
tomorrows revenues today, need to be discouraged.
8
9. Revenue Recognition Before
Delivery
Long-Term Construction
Accounting Methods
Percentage-of-Completion
Method
1) Terms of contract must
be certain, enforceable.
2) Certainty of performance
by both parties
3) Estimates of completion
can be made reliably
Question 7 & 9
Completed Contract
Method
1) For short-term contracts
2) Used for long-term
contracts only when
conditions for percentage
completion are not met
3) Abnormal contract risks
9
10. Basic Idea of Percentage of Completion
•
•
•
Reflect the economic substance of the activities of the company
• I/S: Revenues earned and expenses incurred to reflect
the efforts and accomplishments each period. They are
not all deferred until the final year of project
completion.
• B/S: Value of asset being constructed is adjusted at the
end of each period to reflect the amount of revenue
recognized on the contract
Requires the use of estimates
What information do we need?
• Contract revenue
• Expenses incurred (or other input or output measures)
• Estimated remaining expenses (or other input or output
measures)
10
• Billing and cash from customer
11. Percentage-of-Completion:
Balance Sheet Accounts
“Construction in Process” (CIP)
•An Inventory account used to accumulate the amount recognized as Revenue
throughout the contract (Similar to a Work-In-Process inventory account, but
includes not only cost, but also the gross profit to date)
•First the construction costs are recorded in this account as they are incurred
•Then the gross profit is added to this account at the end of each period when
Revenue is recognized. Thus, the balance in this account then equals the total
revenue recognized on the contract to date.
•This inventory account is not removed until the construction is complete and
title is transferred to the new owner. Then it is offset against Billings on
Construction in Process.
“Billings on Construction in Process”
•A Contra-Inventory account to CIP, used to accumulate the amount that a
customer has been billed and thus recorded in Cash or Accts Rec.
•Interim billings are not usually based upon percentage of costs or completion.
Thus, the amount billed and recorded in Billings on CIP is not likely to be
equal to the revenue recognized, which is the balance in the CIP account.
11
12. Percentage-of-Completion:
Balance Sheet Accounts
• “Construction in Process” (CIP) An Inventory account which equals
the total revenue recognized on the contract to date.
• “Billings on Construction in Process” A Contra-Inventory account to
CIP, used to accumulate the amount that a customer has been billed and
thus recorded in Cash or Accts Rec.
• Interim billings are not usually based upon percentage of costs or
completion. Thus, the amount billed and recorded in Billings on CIP is not
likely to be equal to the revenue recognized, which is the balance in the
CIP account.
• At the end of any accounting period, the difference between the balance
in “CIP” and “Billings on CIP” will appear on the balance sheet.
1) If “CIP” > “Billings on CIP”, the difference will be reported as an asset
2) If “Billing on CIP” > “CIP”, the difference will appear as a liability.
• The two accounts (CIP and Billings on CIP) will equal at the end of the
contract. They are closed out against each other when construction is
complete and title is transferred to the new owner.
12
13. Percentage-of-Completion:
Financial Statements
Balance Sheet
Cash
Accounts Receivable
Inventory:
Construction in Process (Cost + Gross Profit = Revenue
recognized to-date on the contract)
Less Billings on Construction in Process (amount billed;
amount of cash received and/or still in A/R)
Total amount in Current assets related to the contract will equal the amount
of Revenue Recognized to date on the contract (the amount in cash and/or
A/R will be offset against Billings on CIP)
Income Statement
Construction Revenue
Construction Costs
Gross profit on Construction efforts
s
13
14. Percentage-of-Completion: Journal Entries
During the period to record costs of construction:
DR:
Construction in process (CIP)
CR
Cash, Raw Materials, A/P, Acc. Depr, Wages Payable
When contract says you can make progress billings to customer:
DR:
Accounts receivable
CR
Billings on CIP
To record cash collections:
DR:
Cash
CR
Accounts receivable
End of the Accounting Period to recognize Revenue, cost & Gross Profit
DR:
CIP (gross profit adjustment for current year)
DR.
Construction Costs (Expense account)
CR
Construction Revenue
14
15. Percentage-of-Completion: Journal Entries
End of Construction when construction is complete and title is
transferred to the new owner:
DR:
Billings on Construction in process
CR
Construction in Process
The total amount invoiced in Billings on CIP will equal the total
revenue recognized to-date on the contract at the end which has
been captured in the CIP account. Thus the two accounts are
closed out against each other as the construction company no
longer has title to the asset and the amount invoiced has been
recorded in cash and/or Accounts Receivable.
15
16. Computing the Revenue & Gross Profit
to recognize at the end of each period
using Percentage-of-Completion
1
Costs incurred to date
= Percent complete
Most recent estimated total costs
2 Estimated total revenue x Percent complete
= Revenue to be recognized to date
3 Total revenue to be recognized to date less Revenue
recognized in PRIOR periods = Current period revenue
4 Current Period Revenue less current costs = Gross profit
16
17. Percentage-of-Completion:
Homework Problem 6
Data: Contract price: $8,400,000
Start date:
July, 2003
Balance sheet date:
Given:
2010
Estimated cost: $4,000,000
Finish: October, 2005
Dec. 31
2011
2012
Costs incurred during the year $2,880,000 $2,230,000
Estimated costs to complete $3,530,000 $2,190,000
total estimated costs
$2,190,000
$
-0-
Progress Billings during year
Cash collected during year
$1,700,000
$3,200,000 $3,500,000
What is the percent complete, revenue, and gross
17
profit recognized each year?
17
18. Percentage-of-Completion:
Homework Problem 6
Data: Contract price: $8,400,000
Start date:
July, 2003
Balance sheet date:
Given:
2010
Estimated cost: $4,000,000
Finish: October, 2005
Dec. 31
2011
2012
Costs incurred during the year $2,880,000 $2,230,000
Estimated costs to complete $3,530,000 $2,190,000
total estimated costs
$6,400,000 $7,300,000
$2,190,000
$
-0$7,300,000
Progress Billings during year
Cash collected during year
$1,700,000
$3,200,000 $3,500,000
What is the percent complete, revenue, and gross
18
profit recognized each year?
18
19. Percentage-of-Completion:
Homework Problem 6
2010
2011
2012
% complete
to-date
2,880,000 ___% 2,880k + 2230K =
$6,400,000
$5,110,000=___%
$7,300,000
Revenue
recognized
8,400,000 * ___% 8,400,000 *__%
8,400,000
= 3,780,000
less 3,780,000 less 5,880,000
= 2,100,000
= 2,520,000
Gross Profit (loss) $3,780,000 less
$2,880,000
recognized
$________
$7,300,000
$7,300,000
100 %
2,100,000 less
2,520,000
2,230,000
less 2,190,000
= $_________
= $_______
Contract to date
Revenue
Costs
Gross Profit
$3,780,000
$2,880,000
$900,000
$5,880,000
5,110,000
$ 770,000
8,400,000
7,300,000
$1,100,000
19
20. Percentage-of-Completion:
Homework Problem 6
2010
2011
% complete
to-date
2,880,000 45% 2,880k + 2230K =
$6,400,000
$5,110,000=70%
$7,300,000
Revenue
recognized
8,400,000 * 45%
= 3,780,000
Gross Profit (loss) $3,780,000 less
$2,880,000
recognized
$900,000
2012
$7,300,000
$7,300,000
100 %
8,400,000 * 70%
8,400,000
less 3,780,000 less 5,880,000
= 2,100,000
= 2,520,000
2,100,000 less
2,230,000
= (130,000)
2,520,000
less 2,190,000
= 330,000
Contract to date
Revenue
Costs
Gross Profit
$3,780,000
$2,880,000
$900,000
$5,880,000
5,110,000
$ 770,000
8,400,000
7,300,000
$1,100,000
20
21. Percentage-of-Completion: the Construction
in Progress Account
Note that Gross Profit is stored in the CIP Account – this is very
different from “ordinary” sales transactions, where gross profit is
not in any specific account
• A T-account analysis of the CIP account is very useful in answering
questions
• For example, you could be told that Daniels Construction incurred
$1 million in construction costs on a new contract this year. They
expect to incur another $7 million to complete the project. The
balance in the CIP account at year end is $1.2 million. What is
the total revenue they expect to earn on the contract?
• Answer: 1.2 – 1 = 200,000 in GP recognized
• Project is 1/(1+7) or 12.5% complete, so 200,000 / 0.125 = $1,600,000
in total profit
• Since profit is revenues minus expenses, total revenues must be 1.6 +
8 = $9.6 million
21
22. Completed Contract Method
Use For Short Term Construction Contracts
Or when does not meet criteria for % Completion:
1. Terms of contract not certain, or enforceable
2. Certainty of Performance by either party is in question
3. Realiable estimates to measure % complete are not
available (cost, input or output measures)
No revenue, no expense, no gross profit recognized until the
project is actually completed.
Journal entries prepared during the life of contract are the same as
those prepared under the percentage-of-completion method with
the exception of the last journal entry that recognizes periodic
revenue, expense and gross profit.
Instead, the entire revenue, expense and gross profit are recorded
at the end of the project.
22
23. Completed Contract
• Assuming the same numbers as example
before, what are the journal entries under
the completed contract method?
• All journal entries for 2010, 2011, and 2012
would appear exactly as before, except that
there would be no revenue recognition journal
entry in each year
• Therefore, the balance in CIP at the end of each
year would represent only the inventoried
construction costs
23
24. Losses on Contracts
Need to determine if the loss is for the current
period or if for the contract overall.
• If on overall profitable contract, recognize the
loss in the period incurred via “negative gross
profit” (see example Problem 6 year 2011)
• Overall unprofitable contract
• Percentage of completion: Recognize entire contract
loss now by “backing out” previous gross profit
• Completed contract: Recognize the entire loss now.
What is the theoretical justification for this?
24
25. Disclosures in Construction
Company Financial Statements
Construction contractors should disclosure:
the method of recognizing revenue,
the basis used to classify assets and liabilities as
current (nature and length of the operating cycle),
the basis for recording inventory,
the effects of any revision of estimates,
the amount of backlog on uncompleted contracts, and
the details about receivables.
25
26. Revenue Recognition Before
Revenue Recognition Before
Delivery
Delivery
Completion-of-Production Basis
In certain cases companies recognize revenue at the
completion of production even though no sale has been
made.
Examples are:
precious metals or
agricultural products.
What is the theoretical justification for this?
26
27. Revenue Recognition After Delivery
Revenue recognition is deferred when collection
of sales price is not reasonably assured and no
reliable estimates can be made.
Methods of deferring revenue:
Installment-sales method
Cost-recovery method
Generally
Employed
Deposit method – cash received prior to
delivery or transfer of property. Thus sale
is not complete, and cash is recorded as a
customer deposit (current liability).
27
28. The Installment Sales Method
• Recognize income in periods of cash
collection rather than at the point of sale.
• Title typically does not pass to the buyer
until all cash payments have been made to
the seller.
• Recognize both Revenue and Cost of Sales in
period of sale, but Gross profit is deferred to
the periods of collection.
• Selling and administrative expenses are not
deferred.
28
29. The Installment Sales Method
• Installment sales must be kept separate from
regular sales
• Gross profit on installment sales must be
determinable
• The amount of cash collected from
installment accounts by year sold must be
known
• Provision must be made to carry forward each
year’s deferred gross profit separately
29
30. Steps to Record Installment Sales
1.
2.
3.
4.
5.
Record initial Installment sale, keeping track of A/R
by year sold and noting revenue as “Installment
Sales”.
Cost of sales and inventory reduction recorded
normally, using information to compute Gross Profit
rate each year.
When closing “Installment Sales and COGS, defer the
Gross Profit by year of sale.
Record cash collections reducing A/R by year of
original sale.
Realize Gross profit on cash collected, taking Cash
times gross profit rate in year of original sale, and
reducing deferred gross profit for the corresponding
30
year.
31. The Installment Sales Method:
Example
Given:
2003
Installment sales $200,000
Cost of sales
$150,000
Gross Profit
$ 50,000
Cash received in:
from 2003 sales $ 60,000
from 2004 sales $ -0from 2005 sales $ -0-$
2004
2005
$250,000
$190,000
$ 60,000
$240,000
$168,000
$ 72,000
$ 100,000 $ 40,000
$ 100,000 $125,000
-0$ 80,000
Determine the realized and deferred gross profit.
31
32. The Installment Sales Method:
Example
2003
2004
2005
Gross profit rate
25%
24%
30%
Realized Gross Profit:
From 2003 sales (e.g., 60,000 x 25%) ($100,000 x 25%) ($40,000 x 25%)
Realized in
$ 15,000 $ 25,000 $ 10,000
From 2004 sales:
($100,000 x 24%) ($125,000 x 24%)
Realized in:
$ -0- $ 24,000 $ 30,000
From 2005 sales:
($80,000 x 30%)
Realized in:
$ -0- $
-0- $ 24,000
32
32
33. The Installment Sales Method: 2003
Journal Entries for Gross Profit
1. When the 2003 installment sale is made:
Installment A/R (2003)
Installment Sales
200,000
200,000
2. Cost of Sales
Inventory
150,000
3. Installment Sales
Cost of Sales
Deferred Gross Profit, 2003
200,000
150,000
150,000
50,000
When cash is received, some deferred GP is recognized as revenue:
4. Cash
60,000
Installment A/R (2003)
60,000
5. Deferred Gross Profit, 2003
Realized Gross Profit (I/S)
(Realized: $60,000 x 25%)
15,000
15,000
33
33
34. The Installment Sales Method: 2004 Journal
Entries for Gross Profit
1. Installment A/R
Installment Sales
2. Cost of Sales
Inventory
(2004)
3. Installment Sales
Cost of Sales
Deferred Gross Profit, 2004
250,000
250,000
190,000
190,000
250,000
190,000
60,000
4. When cash is received, some deferred GP is recog’d as revenue:
Cash
200,000
Installment A/R (2003)
100,000
Installment A/R (2004)
100,000
5. Deferred Gross Profit, 2003
Deferred Gross Profit, 2004
Realized Gross Profit (I/S)
(Realized: ’03: $100K x 25% + ’04 $100K X 24%)
25,000
24,000
49,000
34
35. Installment Sales Method: 2005 Journal
Entries
1.
2.
3.
4. When cash is received, some deferred GP is recognized as revenue:
Cash
245,000
5.
35
35
36. Installment Sales Method: 2005 Journal
Entries
1. Installment A/R
Installment Sales
2. Cost of Sales
Inventory
(2005)
3. Installment Sales
Cost of Sales
Deferred Gross Profit, 2005
240,000
240,000
168,000
168,000
240,000
168,000
72,000
4. When cash is received, some deferred GP is recognized as revenue:
Cash
Installment A/R (2003)
Installment A/R (2004)
Installment A/R (2005)
5. Deferred Gross Profit, 2003
Deferred Gross Profit, 2004
Deferred Gross Profit, 2005
Realized Gross Profit (I/S)
245,000
40,000
125,000
80,000
10,000
30,000
24,000
64,000
(Realized: ’03: $40K x 25% + ’04 $125K X 24% + ’05 80K X 30%)
36
37. The Cost Recovery Method
• Used when no reasonable basis for estimating
collectibility as in franchises and real estate.
• Seller recognizes no profit until cash
payments by buyer exceed seller’s cost of
merchandise.
• After recovering all costs, seller includes
additional cash collections in income.
• The income statement reports the amount of
gross profit recognized and the amount
deferred.
37
38. The Original Example – Cost
Recovery Method
Given:
2003
2004
2005
Installment sales $200,000
Cost of sales
$150,000
Gross Profit
$ 50,000
$250,000
$190,000
$ 60,000
$240,000
$168,000
$ 72,000
Cash received in:
from 2003 sales $ 60,000
from 2004 sales $ -0from 2005 sales $ -0-$
$ 100,000 $ 40,000
$ 100,000 $125,000
-0- $ 80,000
Determine the realized and deferred gross profit.
38
39. The Cost Recovery Method:
2003 Journal Entries
2003: (J/E’s for sales and deferral of GP are same as in installment method)
1. When the 2003 installment sale is made:
Installment A/R (2003)
Installment Sales
200,000
200,000
2. Cost of Sales
Inventory
150,000
3. Installment Sales
Cost of Sales
Deferred Gross Profit, 2003
200,000
Cash collection J/E’s:
4. Cash
Installment A/R (2003)
150,000
150,000
50,000
60,000
60,000
5. No Gross Profit realized until cost of Sales recovered by cash collections
Note: costs remaining to recover = 150,000 – 60,000 = 90,000 before any
recognition of profit
39
5.
39
40. The Cost Recovery Method
2004:
J/E’s for sales and deferral of GP are same as in installment method
Cash
Installment A/R (2003)
Installment A/R (2004)
200,000
100,000
100,000
• 2003 GP can be recognized: 150,000 – 60,000 – 100,000 = 10,000 to
be recognized
• No 2004 GP to be recognized: 190,000 – 100,000 = 90,000
Deferred GP, 2003 sales
Recognized GP
10,000
10,000
40
41. The Cost Recovery Method
2005:
J/E’s for sales and deferral of GP are same as in installment method
Entry to record Cash Collections:
Cash
245,000
Entry to record Realized Gross Profit:
41
42. The Cost Recovery Method
2005:
J/E’s for sales and deferral of GP are same as in installment method
Cash
Installment A/R (2003)
Installment A/R (2004)
Installment A/R (2005)
245,000
40,000
125,000
80,000
• All cash collected in 2003 can be recognized as GP because costs
covered in 2004
• 2004 GP to be recognized: 190,000 – 100,000 – 125,000 = 35,000
• No GP for 2005: 168,000 – 80,000 = 88,000
Deferred GP, 2003 sales
Deferred GP, 2004 sales
Recognized GP
40,000
35,000
75,000
42
43. Installment Sales Issues - Interest
and Repossessions
• Interest: recognize at time of receipt (do
not defer)
• Repossessions:
• Be sure to account for all payments and
recognition of gross profit until the repossession
date
• Set up repossessed goods at their fair value at
repossession (not what they were worth when
originally sold)
• Write off any remaining A/R and deferred Gross
Profit; recognizing the gain/loss to make the
journal entry balance
43
44. Franchise Revenue
(Appendix 18A)
Basic Idea:
• Various types of franchise arrangements, we will
focus on service sponsor-retailer
• Franchisor sells
(1) right to operate business and
(2) provides on-going support activities.
• Revenue streams
(1) initial sale of franchise and related assets/services
(2) fees based on the operation of the franchise
So how does franchisor record this revenue?
44
45. Franchise Revenue
• Initial Franchise fee
• Revenue recorded when there is:
• Substantial performance
• No remaining obligation to refund any cash or excuse any
non-payment of note. Generally assumed to be when
franchisee commences operations
• Collection of fee is reasonably assured
• If terms not met, then Unearned Franchise Fees
• Often payment is in cash and a LT note receivable
• Continuing Fees
• When earned and receivable.
• Often amount must be verified
45
46. Franchise Revenue Example
On 3/31/09 the Red Hot Chicken Wing Corp. entered into a
franchise agreement with Thomas Keller. In exchange for an initial
franchise fee of $50,000, Red Hot will provide initial services to
include the selection of location, construction of building,
employee training and consulting services over several years.
$10,000 is payable on 3/31/09, with the remaining $40,000 payable
in annual installments. 10% interest on the note (at market rate) is
payable annually. In addition, the franchisee will pay continuing
franchise fees of $1000 per month for advertising and promotion
provided by Red Hot, beginning immediately after the franchise
begins operations. Thomas Keller opened his Red Hot franchise for
business on 9/30/09
46
48. Consignments (Appendix 18A)
Basic idea:
• Consignor “gives” merchandise to a a reseller to sell on your behalf
to an end user.
• Can’t recognize revenue until sold to end user
Entries:
Ships to consignee
Inventory on consignment
Finished good inventory
Notified of sale to end user
Cash
Commission expense
Revenue from consigned sales
COGS
Inventory on consignment
xxx
xxx
xxx
xxx
xxx
xxx
xxx
48
49. Revenue Recognition:
US GAAP vs. IFRS
1. Long-term construction contracts when outcomes
cannot be reasonably estimated:
•
US GAAP: must use Completed Contract Method (No
revenue or expense is recognized until the end of the
contract)
•
IFRS: must use the zero-profit method (revenues are
recognized only to the extent of costs)
1. Service Revenue
•
US GAAP: follow specific industry guidance for revenue
recognition
•
IFRS: typically use the % Completion method (or straightline if services are specified over a period of time)
49
51. Percentage-of-Completion:
Example
Data: Contract price: $4,500,000
Start date:
July, 2003
Balance sheet date:
Given:
Estimated cost: $4,000,000
Finish: October, 2005
Dec. 31
2003
Costs to date
$1,000,000
Estimated costs to complete $3,000,000
Progress Billings during year
$900,000
Cash collected during year
$750,000
2004
$2,916,000
$1,134,000
$2,400,000
$1,750,000
2005
$4,050,000
$
-0$1,200,000
$2,000,000
What is the percent complete, revenue, and gross
51
profit recognized each year?
52. Percentage-of-Completion:
Example
2003
2004
2005
% complete
to-date
1,000,000 = 25% 2,916,000= 72%
4,000,000
4,050,000
100 %
Revenue
recognized
4,500,000 * 25%
= 1,125,000
4,500,000 * 72% 4,500,000
less 1,125,000 less 3,240,000
= 2,115,000
= 1,260,000
Gross Profit
recognized
1,125,000 less
1,000,000
= 125,000
2,115,000 less
1,916,000
= 199,000
1,260,000
less 1,134,000
= 126,000
52
53. Percentage-of-Completion: Journal Entries
2003
To record cost of construction:
DR
Construction in process (CIP)
CR
Accounts Payable
1,000,000
1,000,000
To record progress billings to customer:
DR
Accounts receivable
CR
Billings on CIP
900,000
900,000
To record cash collections:
DR
Cash
CR
Accounts receivable
750,000
750,000
53
54. Percentage-of-Completion: Entries
Involving Third Parties
2003
To record revenue and expense
DR
DR
CIP (plug gross profit here)
125,000
Construction Expenses
1,000,000
CR
Revenue (1m/(1m+3m)x4.5m)
1,125,000
Note: Construction expenses = actual expenditures for the
period
54
55. Balance Sheet 2003
Construction In Progress
1,000,000
Billings
900,000
125,000
900,000
1,125,000
Balance Sheet
… in current assets:
CIP
Billings
1,125,000
(900,000)
Costs and Recognized Gross Profit
in excess of Billings
225,000
55
56. Percentage-of-Completion:
Journal Entries
2004:
Construction in Progress (2.916m – 1.0m)
Cash, A/P, etc.
1,916,000
1,916,000
A/R
Billings
2,400,000
2,400,000
Cash
A/R
1,750,000
1,750,000
CIP
Construction Expenses
Revenue (2.916m/4.050m x 4.5m) – 1,125,000
199,000
1,916,000
2,115,000
56
57. % Completion Balance Sheet 2004
Construction In Progress
1,000,000
Billings
900,000
125,000
1,916,000
2,400,000
199,000
3,300,000
3,240,000
Balance Sheet
… in current liabilities:
Billings
Less: CIP
3,300,000
(3,240,000)
Billings in excess of cost
and recognized gross profit
60,000
57
60. Percentage-of-Completion: Entries
At the end of the contract:
To record completion of project:
DR
Billings on CIP
4,500,000
CR
Construction in process
4,500,000
Over the life of the contract, the total credits to “Billings on CIP”
will equal the total amount billed to the customer, which is the
total revenue received over the life of the contract.
60
61. Completed Contract
• Assuming the same numbers as example
before, what are the journal entries under
the completed contract method?
• All journal entries for 2003, 2004, and 2005
would appear exactly as before, except that
there would be no revenue recognition journal
entry in each year
• Therefore, the balance in CIP at the end of each
year would represent only the inventoried
construction costs
61
62. Completed Contract: Journal Entries
2003:
Construction in Progress (CIP)
Cash, A/P, etc.
1,000,000
1,000,000
A/R
Billings
900,000
Cash
A/R
750,000
900,000
750,000
Entries above same as for % Completion. No entry to record
revenues and expenses.
62
63. Balance Sheet 2003 – Completed Contract
Construction In Progress
1,000,000
Billings
900,000
900,000
1,000,000
Balance Sheet
… in current assets:
CIP
Billings
1,000,000
(900,000)
Costs and Recognized Gross Profit
in excess of Billings
100,000
63
64. Completed Contract: Journal Entries
2004:
Construction in Progress (2,916 – 1,000)
Cash, A/P, etc.
1,916,000
1,916,000
A/R
Billings
2,400,000
2,400,000
Cash
A/R
1,750,000
1,750,000
J/E above are same as for % Completion (no entry made for
revenue and expense)
64
65. Completed Contract Balance Sheet 2004
Construction In Progress
1,000,000
Billings
900,000
1,916,000
2,400,000
3,300,000
2,916,000
Balance Sheet
… in current liabilities:
Billings
Less: CIP
3,300,000
(2,916,000)
Billings in excess of cost
and recognized gross profit
384,000
65
66. Completed Contract: Journal Entries
2005:
CIP (4,050 – 2,916)
Cash, A/P, etc.
1,134,000
A/R
Billings
1,200,000
Cash
A/R
2,000,000
1,134,000
1,200,000
2,000,000
Now that the project is done, we can close out the Billings and CIP accounts and
record Construction Revenue and Construction Expense:
Billings
Revenue
4,500,000
Construction Expenses
CIP
4.050,000
4,500,000
4,050,000
66
When it is EARNED and either REALIZED or REALIZABL
1. Earned: when the seller has substantially accomplished what it must do to be entitled to the benefits represented by the revenue; when the earnings process is virtually complete (seller is not obligated to perform significant activities after the sale)
Realized: The amount of revenue that will be collected is reasonably assured and measurable with a reasonable degree of reliability. (buyer) Collectibility of sales price is reasonably assured or the amount uncollectible can be estimated reasonably
Realized - when goods and services are exchanged for cash or claims to cash (receivables)
Realizable - when assets received in exchange are readily convertible to known amounts of cash or claims to cash. Assets are readily convertible when they are salable or interchangeable in an active market at readily determinable prices without significant additional cost.
Revenue - the inflows of assets and/or settlements of liabilities from delivering or producing goods, rendering services, or other earnings activities that constitute the enterprise's ongoing major or central operations during a period.
Recognition - the process of formally recording an item in the accounts of an entity.
When a repurchase agreement exists at a set price and this price covers all cost of the inventory plus related holding costs, the inventory and related liability remain on the seller’s books. In other words, no sale.
1. Sellers price is known (fixed or determinable at the date of sale) 2. Buyer's payment is not contingent upon the resale of product 3. The buyer's obligation is not altered if product is stolen or damaged 4. Buyer is a separate entity from seller 5. Seller is not obligated to help buyer resell the product 6. Future returns can be estimated
When a repurchase agreement exists at a set price and this price covers all cost of the inventory plus related holding costs, the inventory and related liability remain on the seller’s books. In other words, no sale.
1. Sellers price is known (fixed or determinable at the date of sale) 2. Buyer's payment is not contingent upon the resale of product 3. The buyer's obligation is not altered if product is stolen or damaged 4. Buyer is a separate entity from seller 5. Seller is not obligated to help buyer resell the product 6. Future returns can be estimated
Sales price is reasonably assured, the units are interchangeable and no significant costs are involve in distributing the product.
May also be difficult to determine the cost of the units produced.