realize

Examples of realize in the following topics:

• Gain Contingencies

  • If a specific event that can cause the gain occurs, and the gain is realized, then the gain is disclosed .
  • Care should be taken that misleading language is not used regarding the potential for the gain to be realized.
  • This constraint also encourages the omission of revenues and gains until those gains are realized.
  • Thus, for a gain contingency, only a realized gain is accrued for and disclosed on the income statement.
  • However these gains should only be accrued when the gain is realized.

• Valuing Accounts Receivable

  • Receivables of all types are normally reported at their net realizable value, which is the amount the company expects to receive in cash.
  • Receivables of all types are normally reported on the balance sheet at their net realizable value, which is the amount the company expects to receive in cash .
  • Since the specific customer accounts that will become uncollectible are not yet known when the adjusting entry is made, a contra-asset account named allowance for bad debts, which is sometimes called allowance for doubtful accounts, is subtracted from accounts receivable to show the net realizable value of accounts receivable on the balance sheet.

• Sale

  • The disposal sale of an asset is similar to a regular asset sale, where cash proceeds are received and a loss or gain may be realized.
  • The proceeds received on the asset sale are compared to the asset's book value to determine if a gain or loss on disposal has been realized.
  • If the proceeds are less than book value, a loss on disposal has been realized.
  • Depending on whether a loss or gain on disposal was realized, a loss on disposal is debited or a gain on disposal is credited.
  • A business disposing of a building through a sale receives cash proceeds and may realize a gain or loss.

• Recognition of Revenue Prior to Delivery

  • The accounting principle regarding revenue recognition states that revenues are recognized when they are earned (transfer of value between buyer and seller has occurred) and realized or realizable (collection is reasonably assured).
  • Revenue must be realizable.

• Current Guidelines for Revenue Recognition

  • According to the principle, revenues are recognized if they are realized or realizable (the seller has collected payment or has reasonable assurance that payment on goods will be collected).
  • By following the matching principle, businesses reduce confusion from a mismatch in timing between when costs (expenses) are incurred and when revenue is recognized and realized.

• Write-Offs

  • The direct write-off method is simpler than the allowance method in that it allows for one simple entry to reduce accounts receivable to its net realizable value.
  • Because there is an inherent risk that clients might default on payment, accounts receivable have to be recorded at net realizable value.
  • A write-off does not affect the net realizable value of accounts receivable.
  • For example, suppose that Amos Company has total accounts receivable of USD 50,000 and an allowance of USD 3,000 before the previous entry; the net realizable value of the accounts receivable is USD 47,000.
  • After posting that entry, accounts receivable are USD 49,250, and the allowance is USD 2,250; net realizable value is still USD 47,000, as shown here:

• Assessing Fair Value

  • Realized gains and losses are included in income; unrealized amounts are included in income (trading investments) or in other comprehensive income (available-for-sale investments).
  • Realized holding gain (realized through sale) increase in fair value of an asset while held.

• Fundamental Concepts in Accounting

• The Importance of Timing: Revenue and Expense Recognition

  • According to the principle of revenue recognition, revenues are recognized in the period when it is earned (buyer and seller have entered into an agreement to transfer assets) and realized or realizable (cash payment has been received or collection of payment is reasonably assured).

• Importance of Recognition and Measurement

  • According to the revenue recognition principle, revenues are recognized when they are realized or realizable and earned—usually when goods are transferred or services rendered—regardless of when cash is received.
  • It reduces noise from the timing mismatch between when costs are incurred and when revenue is realized.