ADMS 3585 Lecture Notes - Lecture 5: Accrual, Remittance, Gross Profit

• School: York University
• Department: Administrative Studies
• Course: ADMS 3585
• Professor: Lykke Dela Cour

Document Summary

80 units shipped at cost of ,000 each. Cost of goods sold (37/80 x ,005,800) (927,683) (74,370) Problem 6-1 (a) earnings approach versus the contract-based approach. Under the earnings approach, the concern is only about recognizing revenue from the sales contract. The contract-based approach is concerned about both the recognition of the sales contract and the related revenue. Under the contract- based approach, the contract(s) with the customer are identified, the separate performance obligations in the contract are identified, the transaction price is determined and allocated, and revenue is recognized when a performance obligation is satisfied. Both methods require that the revenue be measurable and collectible before recognition can occur. Under the earnings approach, revenue recognition depends on the company"s earnings process. Revenue is recognized in a manner consistent with this earnings process when the company has substantially completed its performance obligations. This approach focuses on measuring revenues and costs and appropriately reflecting these in the income statement.