Under this revenue is discerned or accounted. Everything devolves on the sale. Credit Sales is a vital element for revenue recognition as all the sale payments are not done in cash. Revenue is the actual amount of money brought in by various business activities, and it is the cash that organization receives after all the discounts and deduction on taxes made. It has to be realised when a particular transaction is made and at the time when transaction is achieved.
Methods of Revenue Recognition Homework Answers tip:
Revenue = price of goods and services sold out * amount of goods and services sold
Revenue recognition is a sub-topic of accountancy, and as we know, account severely tests the patience of students. They face many problems in solving the assignments and completing their homework as this topic needs crystal clear knowledge to recognize the revenue and report it within the given time. Now it is clear that revenue recognition is not a leisure topic to deal with. So, to grapple student difficulties methods of revenues recognition homework answer help is offered.
Trouble faced by students
- Deficiency of concentration-
Many students are struggling in various accounts topic and are least interested in studying it, as a result, they do not want to concentrate in the class lectures and later on lack in understanding it.
- Unavailable to interact-
Some of students are introvert in nature and feel shy interacting with teachers in the class as we know there are bunch of students in the class which makes it difficult for the teacher and the student both to communicate separately.
- Tough topics-
No doubt accounts are a baffling subject for students, and they find it impossible to cope up with the homework given in the college due to missing their lectures or whatever reason.
- Absence mind-
Students are least interested in studying such hard topics as a result of which they stay absent mind in the class and face problem in solving their homework and assignments.
- Occupied schedule-
Tight schedule of students five them no time for any extra- curricular activities. They come from school then complete their left over work, studies, revision and much more. Thus, they lack interest in assessing assignment, but methods of revenues and expenses homework answers help them to sort out such problems.
Methods of revenue recognition homework answers example:
If we pay for a magnum ice- cream through cash, it will be viewed as sale of the ice-cream, but if we pay by monopoly board, it will not be considered as sale. The shopkeeper is supposed to inform this to investors, but sometimes they do not do so for their reputation and except the monopoly money and acknowledge it a revenue which directly to the loss of organization.
Thus,we are thankful as revenue realization method and rules are there to prevent from such condition. According to revenue recognition should not be registered till it is gained.
Exceptions to the rules:
- Long term projects–
For long time projects revenue is accepted but the payment is received in installment monthly or yearly till the assignment is finished. For Example- construction projects
- Fabrication process–
In any of the manufacturing projects as the project is completed revenue is considered before the sale of goods and service. Example- any coal mining company after the completion of project knows the value of their products, so they count the revenue before sale.
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Method for revenue recognition is:
- Sales basis method:
In this method,revenue is measured at the time of sales. It is recorded only at the time of change of goods and services.
Methods of revenue recognition homework answers TIP: If a product is ordered and paid before delivery, but the revenue is recorded only when the product is delivered.
- Percentage of culmination method:
This method is usually used for revenue acknowledgment of long-term projects such as engineering services or other services with big projects use this method.
Requisite for this method:
- The project must be long-term imposed by law
- The project is launched in such a way that percentage is forecasted to allocate revenues and expenses.
- c) Dispatched contract method:
Under this method, revenue is recognized only after completion of the project, and it is implied only in the condition if percentage of completion method is unable to meet its demand. It is applied for both revenues and the expenses. This method lacks under- reporting revenue as until and unless the project is completed or dispatched it does not gives any revenues, and once the project is completed it gives magnified revenue.
- Cost recovery method:
It is one the most potential carrying method which takes revenue recognition to a different level as it does not register any revenues until and unless all the assignment costs are calculated. Thus, this method has potency to downplay revenue early on and overdraw revenue future months.
- Installment method:
Under this method, payment is received in installments by the consumer to an organization. It is suitable for the customer’s who cannot pay the timely to the company. Thus, revenue is shown only when company has received payment.
Methods of revenue recognition homework answers example
If a bike is sold for $7000 on installment plan,then the revenue is registered only when payment is given. If the down payment is $2000, then this amount will be recorded at the time of receipt.
- Updated revenue recognition method:
This method was updated in may 2014 with many amendments brought in it as it resulted in new accounting standards coming up with revenue from contract with consumers.
Some effective changes were:
- Discover oral, written and implied contracts with consumers.
- Identity discrete functioning under the contract
- Find out the total cost to be incurred in the contract
- Distribute the price according to the execution
- Acknowledge the revenue after the obligation is finished.