Financial Accounting

0% Complete
0 out of 69 Lessons
0% Complete
0 out of 4 Exams
Previous Lessons
Open Chapter Ch. 1: Basics of Financial Accounting
Lesson #1 Introduction to Financial Accounting
Incomplete Assignment Study Questions for Lesson 1
Lesson #2 Structures of a Business
Incomplete Assignment Study Questions for Lesson 2
Lesson #3 Comparing Internal vs. External Users
Incomplete Assignment Study Questions for Lesson 3
Lesson #4 Business Activities
Incomplete Assignment Study Questions for Lesson 4
Lesson #5 Financial Statements
Incomplete Assignment Study Questions for Lesson 5
Lesson #6 Elements of Financial Accounting
Incomplete Assignment Study Questions for Lesson 6
Open Chapter Ch. 2: Assets, Liability, and Equity
Lesson #7 Assets
Incomplete Assignment Study Questions for Lesson 7
Lesson #8 Liabilities
Incomplete Assignment Study Questions for Lesson 8
Lesson #9 Equity
Incomplete Assignment Study Questions for Lesson 9
Open Chapter Ch. 3: The Double-Entry System and Conceptual Framework
Lesson #10 Accounting Equation
Incomplete Assignment Study Questions for Lesson 10
Lesson #11 Conceptual Framework
Incomplete Assignment Study Questions for Lesson 11
Lesson #12 Double Entry Accounting System
Incomplete Assignment Study Questions for Lesson 12
Lesson #13 Debits and Credits
Incomplete Assignment Study Questions for Lesson 13
Lesson #14 Normal Balances and RED Accounts
Incomplete Assignment Study Questions for Lesson 14
Exam Exam 1
Open Chapter Ch. 4: The Accounting Cycle
Lesson #15 Journalizing and the Accounting Cycle
Incomplete Assignment Study Questions for Lesson 15
Lesson #16 Posting to the General Ledger
Incomplete Assignment Study Questions for Lesson 16
Lesson #17 Trial Balance
Incomplete Assignment Study Questions for Lesson 17
Lesson #18 Adjusting Entries for Accrued Expenses
Incomplete Assignment Study Questions for Lesson 18
Lesson #19 Adjusting Entries for Prepaid Expenses
Incomplete Assignment Study Questions for Lesson 19
Lesson #20 Adjusting Entries for Unearned Revenue
Incomplete Assignment Study Questions for Lesson 20
Lesson #21 Adjusting Entries for Accrued Revenue
Incomplete Assignment Study Questions for Lesson 21
Lesson #22 Adjusting Entries for Amortization and Depreciation
Incomplete Assignment Study Questions for Lesson 22
Lesson #23 Adjusted Trial Balance
Incomplete Assignment Study Questions for Lesson 23
Lesson #24 Preparing the Financial Statements
Incomplete Assignment Study Questions for Lesson 24
Lesson #25 Permanent vs. Temporary Accounts
Incomplete Assignment Study Questions for Lesson 25
Lesson #26 Closing Entries
Incomplete Assignment Study Questions for Lesson 26
Open Chapter Ch. 5: Merchandise Inventory
Lesson #27 Introduction to Merchandise Inventory
Incomplete Assignment Study Questions for Lesson 27
Lesson #28 Periodic vs. Perpetual Inventory Systems
Incomplete Assignment Study Questions for Lesson 28
Lesson #29 Journalizing Purchase Entries
Incomplete Assignment Study Questions for Lesson 29
Lesson #30 Journalizing Sales Transactions
Incomplete Assignment Study Questions for Lesson 30
Lesson #31 Preparing a Multiple-Step Income Statement
Incomplete Assignment Study Questions for Lesson 31
Lesson #32 Periodic Inventory System Purchases
Incomplete Assignment Study Questions for Lesson 32
Lesson #33 Periodic System and the Multiple-Step Accounting System
Incomplete Assignment Study Questions for Lesson 33
Exam Midterm Exam
Open Chapter Ch. 6: Cost Flow Assumptions: FIFO, LIFO, and Average Cost Methods
Lesson #34 Specific Identification Method and Inventory Costing
Incomplete Assignment Study Questions for Lesson 34
Lesson #35 FIFO Method and Inventory Costing
Incomplete Assignment Study Questions for Lesson 35
Lesson #36 Average Cost Method and Inventory Costing
Incomplete Assignment Study Questions for Lesson 36
Lesson #37 The LIFO Method
Incomplete Assignment Study Questions for Lesson 37
Lesson #38 Average Cost Method for the Perpetual System
Incomplete Assignment Study Questions for Lesson 38
Lesson #39 Comparing Inventory Costing Methods
Incomplete Assignment Study Questions for Lesson 39
Open Chapter Ch. 7: Receivables and Bad Debts
Lesson #40 Allowance Method and Uncollectibles
Incomplete Assignment Study Questions for Lesson 40
Lesson #41 The Allowance Method
Incomplete Assignment Study Questions for Lesson 41
Lesson #42 Percentage of Sales Method
Incomplete Assignment Study Questions for Lesson 42
Lesson #43 Percentage of Receivables Method
Incomplete Assignment Study Questions for Lesson 43
Lesson #44 Receivables Method and the Aging Table
Incomplete Assignment Study Questions for Lesson 44
Lesson #45 Write Off Receivables Using the Allowance Method
Incomplete Assignment Study Questions for Lesson 45
Lesson #46 Direct Write-Off Method
Incomplete Assignment Study Questions for Lesson 46
Open Chapter Ch. 8: Revenue Recognition
Lesson #47 Revenue Recognition
Incomplete Assignment Study Questions for Lesson 47
Lesson #48 Revenue Recognition Examples
Incomplete Assignment Study Questions for Lesson 48
Lesson #49 Revenue Recognition and Long Term Contracts
Incomplete Assignment Study Questions for Lesson 49
Lesson #50 Percentage of Completion Method
Incomplete Assignment Study Questions for Lesson 50
Lesson #51 Percentage of Completion Method Journal Entries
Incomplete Assignment Study Questions for Lesson 51
Lesson #52 Percentage of Completion Method and Journalizing Losses
Incomplete Assignment Study Questions for Lesson 52
Lesson #53 Cost Recovery Method
Incomplete Assignment Study Questions for Lesson 53
Lesson #54 Completed Contract Method and Journal Entries
Incomplete Assignment Study Questions for Lesson 54
Lesson #55 Completed Contract Method and Losses
Incomplete Assignment Study Questions for Lesson 55
Exam Exam 3
Open Chapter Ch. 9: Depreciation of Fixed Assets and Gains and Losses
Lesson #56 Depreciation, Amortization and Depletion
Incomplete Assignment Study Questions for Lesson 56
Lesson #57 Straight Line and Declining Balance Methods
Incomplete Assignment Study Questions for Lesson 57
Lesson #58 Straight Line and Double Declining Balance Depreciation Examples
Incomplete Assignment Study Questions for Lesson 58
Lesson #59 Gains and Losses on Disposals of Property, Plant & Equipment
Incomplete Assignment Study Questions for Lesson 59
Open Chapter Ch. 10: Intangible Assets
Lesson #60 Intangible Assets
Incomplete Assignment Study Questions for Lesson 60
Lesson #61 Amortizing Intangible Assets
Incomplete Assignment Study Questions for Lesson 61
Lesson #62 Impairment of Intangible Assets
Incomplete Assignment Study Questions for Lesson 62
Lesson #63 Recording Goodwill, Amortization and Impairment
Incomplete Assignment Study Questions for Lesson 63
Open Chapter Ch. 11: The Indirect Cash Flow Statement
Lesson #64 Preparing a Cash Flow Statement Using the Indirect Method Part 1
Incomplete Assignment Study Questions for Lesson 64
Lesson #65 Cash Flow Statement Using Indirect Method Part 2, Receivables
Incomplete Assignment Study Questions for Lesson 65
Lesson #66 Cash Flow Statement Using Indirect Method Part 3, Inventory
Incomplete Assignment Study Questions for Lesson 66
Lesson #67 Cash Flow Statement Using Indirect Method Part 4, Payables
Incomplete Assignment Study Questions for Lesson 67
Lesson #68 Cash Flow Statement Using Indirect Method Part 5, Non Cash Expenses
Incomplete Assignment Study Questions for Lesson 68
Lesson #69 Cash Flow Statement- Investing and Financing Activities
Incomplete Assignment Study Questions for Lesson 69
Exam Final Exam

Assignments:

Unfinished Assignment Study Questions for Lesson 54

Lesson Objectives:

- When revenue and expenses are recognized with the completed contract method
- Journal entries for when the contract is in process
- How to journalize the contract completion



The completed contract is used for private enterprise companies as an alternative to the percentage of completion method. This method is much more conservative than the POC method because gross profit and revenue figures are not recognized until the contract is actually completed. As we talked about in previous lessons, the point at which the revenue is recognized is known as the critical point.
 
Let's review how to account for the completed contract method and how the journal entries are recorded. Again, we will take a look at the same template of values for cost, revenue and gross profit.



We will start with the year of 2013 and list out the Construction in Process (CIP) account which represents the inventory and the accounts payable account which is the cash and materials that are expensed. The CIP account will be debited for the costs of $2,500,000 and the accounts payable will be credited for $2,500,000.
 
The next entry for billing will debit the accounts receivable account for $2,000,000 and credit the billings on CIP account for $2,000,000. The third entry will account for the collections in which case the cash account is debited for $2,000,000 and the accounts receivable is credited for $2,000,000.
 
As you can see these first three journal entries are identical to the entries we recorded when looking at the percentage of completion method.

Since we are using the completed contract method and the construction contract is still in process, we will not be recording a journal entry for the revenues and gross profits.
 
For 2014, we will use the same format as we used in 2013 as the contract is still not completed at this point.
 
Now, let's look at the entry for 2015 when the revenues and gross profits can be recorded.



When the contract is finally completed, we will be recording all of the revenues and expenses at that time. Let's take a look at the journal entry that would be recorded in 2015 to show that we are recognizing the revenue.
 
We would still have the first three entries for inventory, billings and collections but for the purpose of this example, let's skip right to the final journal entry for the revenue recognition.

As you can see from the journal entry, the construction expense account is debited by the total expense of $9,300,000 and the total revenue on the long term contract is recorded as a credit for $16,000,000. In order to balance out the transaction, the gross profit amount of $6,700,000 is recorded through the construction in process account for this entry.
 
Hopefully now you should have a more thorough understanding of how the completed contract method works and how the journal entries are recorded while the contract is in process versus when it is completed.