Join Jim Stice for an in-depth discussion in this video Before cash collection, part of Running a Profitable Business: Revenue Recognition.
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- Reminder: There are two traditional…revenue recognition criteria that both must be satisfied…before revenue can be recognized.…The seller has to do something: the work.…And the buyer has to do something: pay,…or provide a valid promise to pay.…Now, in many, many cases, revenue recognition…is not a big issue. The primary example here…is so-called cash and carry businesses such as Wal-Mart,…Home Depot, Farmers Markets, a restaurant.…A cash and carry business in one in which the customer…visits the business, receives a service or chooses a good,…pays cash, and then leaves.…
From an accounting standpoint, this is a very…simple transaction. Now let's think about the biggest…cash and carry business in the world.…Wal-Mart. In terms of the two traditional…revenue recognition criteria. And let's examine them.…First, the work. Wal-Mart's work is providing…the retail location and the goods…for the customers to choose.…Once the customer has chosen the merchandise…that they want, put it in their shopping cart…and taken it outside the store,…
But without recognizing revenue, a company can't hope to report any profit. Accordingly, company management is typically under great pressure to recognize revenue as soon as possible. Want to understand these concepts better? Join professors Jim and Kay Stice as they introduce the theory, practice, and implications of revenue recognition. Together they demonstrate how this seemingly innocent accounting topic can turn a reported profit into a reported loss, sometimes with multibillion dollar implications for company values.
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- Defining revenue recognition
- Timing revenue recognition
- Understanding multi-element transactions
- Valuing companies
- Reviewing the great revenue frauds and scandals of history