Sound Investing, Chapter 4 - Revenue Recognition
This chapter comes from a book written by financial accounting expert Kate Mooney. Sound Investing provides you with the expertise to recognize signs of trouble or fraudulent reporting in a company's financial statements. Using recent scandals as examples, it offers clear direction on locating specifics in financial statements as well as the notes, SEC filings, and the annual report that signal possible trouble and presents action steps to take when warning signs appear.
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$200 down payment $200 sales revenue 30 days 6/15 Customer orders 6/15 Customer purchases actually agree to pay amount of revenue appliance assets and liabilities building example calculate the percentage cash collections change in assets complete complicated contract contractor costs Current Accounting Rules current period’s Customer orders refrigerator Customer purchases $2,000 Date of delivery days after delivery delivered determine Disclosure earned enue is recognized erator ered estimate extended Financial Accounting financial statements forecast IBM annual report included installment method Kate Mooney load ment method of revenue month’s nized pay the remainder percent percentage-of-completion method perform the warranty period’s income statement PORTFOLIO profit purchases $2,000 refrigerator raw materials received recognizes revenue Record $200 liability Record $200 sales refrig refrigerator with $200 refund revenue and eliminate Revenue Recognition Methods revenue recognition rules sales basis method Setup sold step takes it home Variations of Revenue