Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : BFT: Will the tulip craze ever break down? -- Ignore unavailable to you. Want to Upgrade?

To: Pancho Villa who wrote (263)	4/6/1998 7:33:00 PM
From: dealmakr	Read Replies (1) \| Respond to of 650

Pancho, Thank you once again for your insights to these complicated accounting practices. I would wonder why there are no entries in column c. I would guess from the form that everything has been collected and there are no writeoffs. Wow what a business. Good Trading Dave PS: In watching the trading today, there was size for sale at the ask most of the day.

To: Pancho Villa who wrote (263)	4/6/1998 9:17:00 PM
From: Pancho Villa	Read Replies (1) \| Respond to of 650

A short lesson on revenue recognition: Answer to a friend's email on my revenue recognition post: Hola Pancho: >superb post. >Can't a company recognize all the revenue when taken in and then carry as a >liability the value of the unused portion of the prepaid services??? let me illustrate with two examples the principle of revenue recognition: in general revenue is recognized (becomes part of the income statement) when the services are provided, the goods delivered; or in the case of a project, revenue may be recognized partially along the way as milestones in the project are reached. The example: Suppose you sell an airline ticket for cash: $200 in December 97.ÿ You are going to Paris Texas on January 17. 1997.ÿ The airline cannot recognize the revenue in the income statement (IS) that closes on 12/31/97 because it has not yet provided the services. The transaction is recorded as follows: Keep in mind that all accounting transactions must maintain: Assets = liabilities + Stockholders equity: Assets: Cash goes up by $200 Liabilities: Services to be rendered goes up by $200. 200 = 200 + 0ÿÿÿÿ (checks) This transaction does not see the IS, thus is not part of 97 revenue. Now ln the IS for the period 12/31/97-3/31/98 the airline can recognize the revenue, because it took you to Paris, as follows: Liabilities: Services to be rendered goes down by $200 (The airline no longer owes you any service) Stockholders Equity: retained earnings account goes up by $200 (the eairline now has the right to cliam the revenue.ÿ of course there is a cost side also) 0 = - 200ÿ + 200 (checks) (the transaction only affected the left hand side) Notice that the retain earnings account is actually linked to the bottom line of the IS (i.e., if you zoom into the retained aernings account you are looking at the IS). so the 200 bucks shows up as revenue in the IS. If the ticket had been bought on credit.ÿ the transaction would have been very similar, except that instead of increasing cash by $200, accounts receivables increases by $200.ÿ When you finally pay the $200 the transaction is posted as follows: Cash account increases by $200 Accounts receivable decreases by 200 (you no lenger owe the money) 200 - 200 = 0 we see this transaction only affected asset accounts and is independent of when the revenue was recognized. Pancho

To: Pancho Villa who wrote (263)	4/8/1998 4:25:00 AM
From: John Tais	Read Replies (1) \| Respond to of 650

What's the difference between the "provision for doubtful receivables" and the "allowance for doubtful receivables"? One seems to be for the income statement and one for the balance sheet. Why is the "provision" increasing while the "allowance" is decreasing? Is this because they're saying, we're financing more memberships, but the receivables are "higher quality" due to EFT? How does it benefit them by drawing down the "allowance" for doubtful receivables on the balance sheet? Bottom line: their cash flow is a lot more negative than you would expect from adding back their depreciation to their book loss.