BUS 251 Chapter 4: Ch. 4 Notes

• School: Simon Fraser University
• Department: Business Administration
• Course: BUS 251
• Professor: Susan Bubra

Document Summary

4 revenue recognition and the statement of income. Revenue = inflows of economic benefits from company"s ordinary operating activities. There does not have to be a receipt of cash for company to recognize revenue. Quantity of revenue = amount & whether the trend shows increase/decrease over some accounting periods. Quality of revenue = source(s) of revenue & company"s ability to sustain revenue over longer term. Users need to be aware of company"s revenue recognition policies so that they can make informed judgments about reported revenues. General revenue recognition criteria state that revenue is earned when: it is probable that economic benefits will flow to the company, amount of these benefits can be reliably measured. Specific revenue recognition criteria for receipt of interest, royalties and dividends: amount of revenue can e reliably measured, probably that economic benefits from transaction will flow to company. Revenue should be measured at fair value of the consideration received/receivable.