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Financial Accounting - Lecture 4

Lecture 4 - Revenue Recognition and Accounts Receivable

Objectives:

1. Discuss the criteria for revenue recognition under accrual accounting: a firm recognizes revenue when it is deemed to be

a. earned and
b. collectible.

2. Introduce the different types of contra-asset accounts related to Accounts Receivable: Allowance for Doubtful Accounts ("ADA"), Allowance for Returns, and Deferred Income Liability.

3. Understand the three alternative methods used to calculate the Allowance for Doubtful Accounts: direct method, percentage of sales, and aging.

4. Work on a detailed example: reverse engineering Intel's cash collections in 2001.

Prof. Richard Frankel, Prof. George Plesko, Prof. Kin Lo
15.515 Financial Accounting, Fall 2003
(Massachusetts Institute of Technology: MIT OpenCourseWare)
http://ocw.mit.edu
Date accessed: 2009-04-30
License: Creative Commons BY-NC-SA

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