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Wiley GAAP 2008 by Colorado Steven M. Bragg Englewood, Ralph Nach American Express Tax and Business Inc., Barry J. Epstein

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Definitions of Terms

Collection methodA method that recognizes revenue when cash is collected.
Completed performance methodA method that recognizes revenue after the last significant act has been completed.
Direct costsCosts that are related specifically to the performance of services under a contract or other arrangement.
Indirect costsCosts that are incurred as a result of service activities that are not directly allocable to specific contracts or customer arrangements.
Initiation feeA one‐time, up‐front charge that gives the purchaser the privilege of using a service or facilities.
Installation feeA one‐time, up‐front charge for making equipment operational so that it functions as intended.
Out‐of‐pocket costsCosts incurred incidental to the performance of services that are often reimbursable to the service firm by the customer either at actual cost or at an agreed‐upon rate (e.g., meals, lodging, airfare, taxi fares, etc.).
Precontract or preengagement costsCosts incurred prior to execution of a service contract or engagement letter.
Product transactionA transaction between a seller and a purchaser in which the seller supplies tangible merchandise to the purchaser.
Proportional performance methodA method that recognizes revenue on the basis of the number of acts performed in relation to the total number of acts to be performed.
Service transactionA transaction between a seller and a purchaser in which the seller performs work, or agrees to maintain a readiness to perform work, for the ...

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