Revenue is recognized for accounting purposes when a performance obligation is satisfied. In some situations, revenue is recognized over time as the fair values of assets and liabilities change. In other situations, however, accountants have developed guidelines for recognizing revenue at the point of sale. Questions: 1. Explain and justify why revenue is often recognized at the time of sale. 2. Explain in what situations it would be appropriate to recognize revenue over time.

Revenue is recognized for accounting purposes when a performance obligation is satisfied. In some situations, revenue is recognized over time as the fair values of assets and liabilities change. In other situations, however, accountants have developed guidelines for recognizing revenue at the point of sale. Questions: 1. Explain and justify why revenue is often recognized at the time of sale. 2. Explain in what situations it would be appropriate to recognize revenue over time.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter3: Accrual Accounting

Section: Chapter Questions

Problem 1MCQ: Which of the following statements is true? Under cash-basis accounting, revenues are recorded when a...

See similar textbooks

Similar questions

Which of the following is the principle that a company must recognize revenue in the period in which it is earned; it is not considered earned until a product or service has been provided? A. revenue recognition principle B. expense recognition (matching) principle C. cost principle D. full disclosure principle
Which of the following is not a criterion to recognize revenue under GAAP? A. The earnings process must be completed. B. A product or service must be provided. C. Cash must be collected. D. GAAP requires that the accrual basis accounting principle be used in the revenue recognition process.
At what point does revenue recognition occur? A. When the purchase order is received B. When the seller receives the money for the job C. When the seller has met performance D. When the purchaser makes payment
Which of the following statements is true? Under cash-basis accounting, revenues are recorded when a company satisfies its performance obligations and expenses are recorded when incurred. Accrual-basis accounting records both cash and noncash transactions when they occur. Generally accepted accounting principles require companies to use cash-basis accounting. The key elements of accrual-basis accounting are the revenue recognition principle, the expense recognition principle, and the historical cost principle.
A company should recognize revenue when a. the revenue is earned b. die contract is signed c. the seller satisfies the performance obligation d. the consideration is received
Revenue is recognized for accounting purposes when a performance obligation is satisfied. In some situations, revenue is recognized over time as the fair values of assets and liabilities change. In other situations, however, accountants have developed guidelines for recognizing revenue at the point of sale. Explain in what situations it would be appropriate to recognize revenue over time. Ignore income taxes.
Revenue is recognized for accounting purposes when a performance obligation is satisfied. In some situations, revenue is recognized over time as the fair values of assets and liabilities change. In other situations, however, accountants have developed guidelines for recognizing revenue at the point of sale. Instructions (Ignore income taxes.) a. Explain and justify why revenue is often recognized at time of sale. b. Explain in what situations it would be appropriate to recognize revenue over time.
(Recognition of Revenue—Theory) Revenue is recognized for accounting purposes when a performance obligation is satisfied. In some situations, revenue is recognized over time as the fair values of assets and liabilities change. In other situations, however, accountants have developed guidelines for recognizing revenue at the point of sale.Instructions(Ignore income taxes.)(a) Explain and justify why revenue is often recognized at time of sale.(b) Explain in what situations it would be appropriate to recognize revenue over time.
An analyst must be familiar with the determination of income. Income reported for a business entity depends on proper recognition of revenues and expenses. In certain cases, costs are recog- nized as expenses at the time of product sale; in other situations, guidelines are applied in capi- talizing costs and recognizing them as expenses in future periods. Required: a. Under what circumstances is it appropriate to capitalize a cost as an asset instead of expensing it? Explain. b. Certain expenses are assigned to specific accounting periods on the basis of systematic and rational allocation of asset cost. Explain the rationale for recognizing expenses on such a basis.
Under the general rule of revenue recognition, revenue is recognized when Group of answer choices A.all related expenses have been incurred. B.a contractual agreement exists, and cash collection is assured. C.the earnings process is complete, and a valid promise of payment has been received. D.marketability and market price are assured.
The Matching Principle is a fundamental accounting concept that states expenses should be recognized in the same period as the related revenues they help to generate. This principle ensures that financial statements accurately reflect the profitability of a business during a specific time frame. Question: In applying the Matching Principle, how does a company determine the appropriate timing for recognizing expenses related to long-term assets, such as depreciation on machinery, to ensure an accurate representation of its financial performance?
Which of the following is not a criterion to recognize revenue under GAAP?A. The earnings process must be completed.B. A product or service must be provided.C. Cash must be collected.D. GAAP requires that the accrual basis accounting principle be used in the revenue recognition process