BUS 214 Chapter Notes - Chapter 5: Accounts Receivable, Accounting Equation, General Ledger
Document Summary
Lo 2: apply gaap for proper revenue recognition. Revenue is the inflow of resources resulting from delivering goods to or rending services for customers. A contract is an agreement between two parties that creates enforceable rights or performance obligations. 1 identify the contract(s) with the customer. 2 identify the performance obligations in the contract. 4 allocate the transaction price to the performance obligation(s) in the contract. 5 recognize revenue when the entity satisfies the performance obligations. Shipping terms the seller and the buyer. The proper time to recognize sales revenue is when ownership of goods changes hands between. This point is determined by the shipping terms in the sales contract. When goods are shipped fob (free on board) shipping point, ownership changes hands and revenue is recognized at the point when the goods leave the seller"s shipping dock. When goods are shipped fob destination, ownership changes hands and revenue is recognized at the point of delivery to the customer.
