You have a friend who is a seamstress specializing in Renaissance costumes. She receives cash well in advance of the required date, often in the fiscal period prior to the date of delivery of the costume, not only to enable her to purchase material but also to cover her labor. She always debits Cash and credits Costume Income. First, explain to her why this entry violates the revenue recognition principle. Second, identify the classification of Unearned Revenue. Third, explain when the Unearned Revenue account is used.
Answer to relevant QuestionsDefine promissory note and identify the two major parties involved. Describe the basic formula for the calculation of interest on a note. Explain each element. On August 5, M. Valenty borrowed $ 8,500 from Costner State Bank for 45 days, with a discount rate of 7 percent. Accordingly, M. Valenty signed a note for $ 8,500, dated August 5. Write entries in general journal form to ...The following were among the transactions of Cliff Shop during this year. The firm, whose fiscal year ends on December 31, uses a periodic inventory system. Jan. 11 Bought merchandise on account from Hardin Company, $ 4,350; ...From the point of view of a creditor, what are the advantages of having a note receivable over having an account receivable?
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