Kieso 15e SGV1 Ch18
18
Revenue Recognition
CHAPTER LEARNING OBJECTIVES
1.
Describe and apply the revenue recognition principle.
2.
Describe accounting issues for revenue recognition at point of sale.
3.
Apply the percentage-of-completion method for long-term contracts.
4.
Apply the completed-contract method for long-term contracts.
5.
Identify the proper accounting for losses on long-term contracts.
6.
Describe the installment method of accounting.
7.
Explain the cost recovery method of accounting.
*8.
Explain revenue recognition for franchises.
*9.
Compare the accounting procedures related to revenue recognition under GAAP and IFRS.
CHAPTER REVIEW
1. One of the most difficult issues facing accountants concerns the recognition of revenue by a business organization. Although general rules and guidelines exist, the significant variety of marketing methods for products and services make it difficult to apply the rules consistently in all situations.
Chapter 18 is devoted to a discussion and illustration of revenue transactions that result from the sale of products and the rendering of services. Throughout the discussion, attention is focused on the theory behind the accounting methods used to recognize revenue. Revenue transactions that result from leasing and the sale of assets other than inventory are discussed in other sections of the text.
Revenue Recognition
2. (L.O. 1) The revenue recognition principle provides that revenue is recognized when (1) it is realized or realizable and (2) it is earned. Revenues are realized when goods and services are exchanged for cash or claims to cash (receivables). Revenues are realizable when assets received in exchange are readily convertible to known amounts of cash or claims to cash. Revenues are earned when the entity has substantially accomplished what it must do to be entitled to the benefits represented by the revenues, that is, when the earnings process is complete or virtually complete.
*Note: All asterisked (*) items
Revenue Recognition
CHAPTER LEARNING OBJECTIVES
1.
Describe and apply the revenue recognition principle.
2.
Describe accounting issues for revenue recognition at point of sale.
3.
Apply the percentage-of-completion method for long-term contracts.
4.
Apply the completed-contract method for long-term contracts.
5.
Identify the proper accounting for losses on long-term contracts.
6.
Describe the installment method of accounting.
7.
Explain the cost recovery method of accounting.
*8.
Explain revenue recognition for franchises.
*9.
Compare the accounting procedures related to revenue recognition under GAAP and IFRS.
CHAPTER REVIEW
1. One of the most difficult issues facing accountants concerns the recognition of revenue by a business organization. Although general rules and guidelines exist, the significant variety of marketing methods for products and services make it difficult to apply the rules consistently in all situations.
Chapter 18 is devoted to a discussion and illustration of revenue transactions that result from the sale of products and the rendering of services. Throughout the discussion, attention is focused on the theory behind the accounting methods used to recognize revenue. Revenue transactions that result from leasing and the sale of assets other than inventory are discussed in other sections of the text.
Revenue Recognition
2. (L.O. 1) The revenue recognition principle provides that revenue is recognized when (1) it is realized or realizable and (2) it is earned. Revenues are realized when goods and services are exchanged for cash or claims to cash (receivables). Revenues are realizable when assets received in exchange are readily convertible to known amounts of cash or claims to cash. Revenues are earned when the entity has substantially accomplished what it must do to be entitled to the benefits represented by the revenues, that is, when the earnings process is complete or virtually complete.
*Note: All asterisked (*) items