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ACC 3023 - Chapter 5
Income Measurement and Profitability Analysis
7
Accounting
Undergraduate 3
10/02/2012

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Cards

Term
realization principle
Definition
1) The earnings process is judged to be complete or virtually complete
2) There is reasonable certainty as to the collectibility of the asset to be received
Term
SABs additional criteria for realization principle
Definition
1) Persuasive evidence of an arrangement exists
2) Delivery has occurred or services have been rendered
3)The seller's price to the buyer is fixed or determinable
4) Collectibility is reasonably assured
Term
Service revenue
Definition
Recognized over time, in proportion to the amount of service performed
Term
point of delivery
Definition
refers to the date legal title to the product passes from seller to buyer
Term
Installment sales method
Definition
Recognizes revenue and costs only when cash payments are received
Term
Cost recovery method
Definition
Deferral of all gross profit recognition until the cost of the item sold has been recovered
Term
installment sales and cost recovery
Definition
Two methods only used in unusual circumstances
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