A company reports revenue when it has delivered economic value and has the assurance that it has received—or will receive—the cash. Learn the details of the revenue recognition process.
- Revenue recognition, when to report revenue,…has been one of the hottest topics…in accounting and business in recent years.…Revenue recognition is the process of deciding…when a sale should be reported…in a company's accounting records.…When has the company performed enough activity…to merit reporting a sale, and when has the company…become convinced that the customer…is going to pay for that good or service.…A company reports revenue when it has delivered…economic value and has an assurance…that is has received, or will receive, the cash.…
Now, let's think about a hypothetical Kamila company,…a company that makes and sells industrial equipment.…And, let's look at a sequence of five events, in order,…with respect to the sale of one piece of equipment…by Kamila to a customer for $100,000.00.…These events occur over the course of almost a year.…The accounting issue is simple.…When should Kamila, the selling company,…report this $100,000.00 sale in its accounting records.…The reporting of the sale is called revenue recognition.…
Skill Level Beginner
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