Concept in 60 seconds: revenue recognition (ASC 606) Think of a gym that sells a 12-month membership for $1,200, paid upfront in January. Has it earned $1,200 in January? No. It has promised a year of access, so it earns the revenue as it delivers: $100 a month. Until then, the unearned part sits on the balance sheet as a contract liability (deferred revenue). That's the core idea of the five-step model: 1. Identify the contract. 2. Identify the promises (performance obligations). 3. Work out the price. 4. Split the price across the promises. 5. Recognise revenue as each promise is fulfille…
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Sign in to postConcept in 60 seconds: debits and credits Every journal entry has at least one debit and one credit, and they're always equal. The trick is knowing which side makes each account go up: - Debits increase assets, expenses and dividends (or drawings). - Credits increase liabilities, equity and revenue. Example: you buy a laptop for $1,000 cash. Equipment (an asset) goes up, so debit Equipment $1,000. Cash (also an asset) goes down, so credit Cash $1,000. Memory aid: DEAD CLIC — Debits for Expenses, Assets, Dividends; Credits for Liabilities, Income, Capital. If the two sides of an entry don'…