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ACC 110 Chapter Notes - Chapter 4: Financial Statement, Income Statement

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School
Ryerson University
Department
Accounting
Course
ACC 110
Professor
Brad Mac Master

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Document Summary

Revenue is an economic gain earned by an entity from providing goods or services to. Dr. cash (asset +) or account receivable (asset +) or unearned revenue (liabilities -) xxx. Income statement account for revenue credited and balance sheet debited when revenue recognized. Any activity by entity to make a good or service available or valuable to customers. Critical-event approach single point in the earning process where 100% of the revenue in a transaction is recognized common for sale of goods or provision of one-time services. [ifrs] 5 criteria for identifying the critical for recognizing revenue on the sales of goods: Performance (by entity: significant risks & rewards transferred, seller has no involvement or control over the goods. Might not have occurred on delivery if buyer resell the merchandise before the seller gets paid or seller has to install the goods and installation is a significant part of the purchase.

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Related Questions

Revenue is recognized based on a five-step process that is applied to a company's revenue arrangements.

Requirements: 1. Describe the revenue recognition principle. Briefly describe the five-step process.

2. Explain the importance of contracts when analyzing revenue arrangements.

3. How are fair value measurement concepts applied in implementation of the five-step process?

4. Briefly discuss how the revenue recognition principle relates to the definitions of assets and liabilities.

5. In the previous revenue recognition guidance, revenue is not be recognized unless the revenue was realized or realizable (also referred to as collectibility). Is collectibility a consideration in the recognition of revenue? Explain.

6. Revenue is usually recognized at the point of sale (a point in time). Revenue may be also recognized over time. Give an example of the circumstances in which revenue is recognized over time and accounting merits of its use instead of the point-of-sale basis.

Revenue earned by a business enterprise is recognized foraccounting purposes at different times, according to thecircumstances. In some situations, revenue is recognizedappropriately as it is earned in the economic sense. In othersituations, revenue is recognized at point of delivery.

Required: 1. Explain and justify why revenue often is recognizedas earned at point of delivery. 2. Explain in what situations itwould be useful to recognize revenue as the productive activitytakes place. 3. At what times, other than those included in (1) and(2) above, may it be appropriate to recognize revenue?

10 Which of the following criteria is not a condition for the revenue recognition principle? a. The accounting entity receives the customer's payment in cash before revenue can be recognized b. The accounting entity has performed or substantially performed by providing goods or services to the customer c. In exchange for the accounting entity's performance the customer has promised to pay in cash or in a form and an amount that is measurable d. Where the accounting entity has received a promise to pay from its customer, collection is reasonably assured e. None of the above The correct answer is 'a'.