A system of accounting in which revenue is recognized when it is earned and expenses are recognized as they are incurred, providing a more accurate picture of a company's financial status across different periods.
The accruals concept is a fundamental accounting principle that requires revenue and costs to be recognized as they are earned or incurred, rather than when money is received or paid. This concept ensures that income and expenses are matched with one another in the correct accounting period.
Accrued revenue refers to revenue that has been earned by a company but has not yet been recorded in the accounts because the corresponding invoice has not been sent or payment has not been received. It is considered an asset on the balance sheet.
Allowance for Doubtful Accounts is a contra-asset account that estimates the portion of receivables that may not be collectible.
A sale made on terms in which cash is to be paid at an agreed future date. As the debtors, who are customers to whom credit sales have been made, pay, the debtors' control account balance will be reduced.
A Direct Financing Lease is a method used by lessors in capital leases where the lessor purchases an asset specifically for rental purposes. The lease payments must be collectable, and there should be no significant uncertainties about any unreimbursable future costs.
Modified accrual accounting is a governmental accounting method where revenues are recognized when they become available and measurable, and expenditures are recognized when the related fund liability is incurred.
Operating expenses are the costs and operating revenues are the income incurred and generated by an organization in the normal course of business, excluding any extraordinary items.
The percentage-of-completion method is an accounting practice used principally for long-term contracts, in which revenue and expenses are recognized proportionally over the term of the project.
Realized profit or loss refers to the profit or loss that has arisen from a completed transaction, typically the sale of goods, services, or other assets. It is recognized legally once the transaction is finalized, regardless of whether cash has been received.
Relevant revenue refers to the income generated from operations that are directly related to the core activities of a business. This figure is crucial for management to assess profitability and make informed financial decisions.
The process of recording revenue in the accounts of an organization in the appropriate accounting period is known as revenue recognition. This principle determines the specific conditions under which income becomes realized as revenue.
A reverse premium, also known as a lease incentive, is a cash payment made by the lessor to the lessee to encourage the latter to enter into a lease agreement.
A sales invoice is a document sent by the seller of goods or services to the buyer, detailing the amounts due, discounts available, payment dates, and such administrative details as account numbers and credit limits. It is a crucial component in business transactions and accounting.
Trade loading, also known as channel stuffing, is a practice where manufacturers or suppliers induce more products into the distribution channel than the end customer demand, often through aggressive sales tactics, to inflate short-term sales and revenue figures.
An unearned discount is an account on the books of a lending institution that recognizes interest deducted in advance from a loan. This interest will be taken into income as earned over the life of the loan.
