Explanation Revenue recognition principle Revenue recognition principle states that every business organization should recognize the revenue when it is earned, no matter, cash related to that obligation is received or not. Scenario 1: Revenue has been recognized in the year 2018 itself where Company IBM has provided the services in 2018 and there is no need of bothering about the cash payment was not made until 2019 Scenario 2: Revenue has been recognized in the year 2018 itself where Company GG sells a one-year membership and the cash also has been paid in the same year with a discount of 25% with the amount of $1,600. Calculation of revenue recognized in the year 2018 for Company GG: Discount=Actual cost × Percentage of discount =$1,600 × 25 % </

4th Edition

ISBN: 9781259934773

Author: SPICELAND

Publisher: MCG

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Financial Transaction Analysis

The transaction analysis is done with the help of the accounting equation. The basic accounting equation is alternatively known as the balance sheet equation is based on the double-entry system which says that for each transaction happening in a business…

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Chapter 5, Problem 5.1AP

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To Calculate: The amount of revenue to be recognized in 2018.

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Chapter 5, Problem 5.21E

Chapter 5, Problem 5.2AP

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FINANCIAL ACCOUNTINGLL W/CONNECT >IC<

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The amount of revenue to be recognized in 2018.

Solution Summary: The author explains revenue recognition principle, which states that every business organization should recognize revenue when it is earned, no matter, cash related to that obligation is received or not.

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To Calculate: The amount of revenue to be recognized in 2018.

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Chapter 5 Solutions