![]() ![]() In such instances, the company may adopt the percentage-of-completion method. However, the company has devoted effort toward completing the project over all three years, not just the third year. In such a project, if the company were to use the revenue earned criterion, it will not recognize any revenue during the first two years, and will recognize the entire Consider a project that takes three years to finish. ![]() Some construction projects may take many years toĬomplete. Revenue recognition at the point of sale is the most common occurrence, butĮxceptions, which do occur, are the focus of this chapter. The two criteria, realized and earned, are generally satisfied at the point of sale, which is when the customer Revenue is earned when an entity has substantially completed the activities Goods or services) that are readily convertible to cash. Realizable means that assets have been received (in exchange for providing Means that cash has been received in exchange for goods or services. Revenues (and gains) are recognized when they are: Is straightforward when accrual accounting is used, it is a more difficult issue. When cash basis accounting is used, recognition ![]() Recognition refers to recording a transaction or item in a financial statement. ![]()
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