Beechy1_5e_ch02_st.pptVIP

2-* Recognition Recognition: the process of measuring and including an item in the financial statements Item is given a title and a numerical value Applies to all financial statement elements in all accounting entities Must meet three criteria: Meets definition of an element Has an appropriate basis of measurement and a reasonable estimate can be made For assets and liabilities – it is probable that economic benefits will flow LO 2-6 昆穷写环仆拽炕帆拓毡怪狮桂印雪粟缓喧扦熄虫甥琼惩姻繁语宛垦躯蓟客BeechyV1_5e_ch02_stBeechyV1_5e_ch02_st 2-* Commitments Commitments – an executory contract wherein neither party has yet fulfilled the requirements Do not recognize since the first recognition criterion is failed i.e. Does not meet the definition of an element LO 2-6 夏檄枚你旭承遭娜紊跌孕退披屁令戊奖洞秉踪客劲头遭氨隔堤萍衫纫适糊BeechyV1_5e_ch02_stBeechyV1_5e_ch02_st 2-* Recognition vs. Realization Realization – is the process of converting an asset, liability or commitment into a cash flow Recognition may occur: prior to realization ex. accounts receivable; at the same time as realization ex. customer makes a deposit Remember: accounting recognition relates to past, present and future cash flows i.e. at not time can accounting recognize financial statement elements that are not based on actual or predicted cash flows LO 2-6 臣舵偶筷列攀典碳瘪补若属闰柒舅蛀概账潮朵仙淋袁而删庙尽境珊颠歪例BeechyV1_5e_ch02_stBeechyV1_5e_ch02_st 2-* Accrual and Deferrals Accrual Concept: the recognition of assets and liabilities that have not yet been realized Recognize transactions when they occur Deferrals: delayed recognition of costs and receipts that have been realized through cash flows but not yet contributed to the earnings process as expenses and revenues LO 2-6 抛圭瞎格寺貌粒窒疼肠织浅板徐毙知八沉悠睹耻储挪钨架斋嚷蹦祝庭燎胁BeechyV1_5e_ch02_stBeechyV1_5e_ch02_st 2-* Revenue Recognition Convention Revenue recognition occurs when all three criteria are met: all significant acts required of the seller have been performed; risks and rewards have been passed and been accepted by the buyer - defini