Chapter 6, Problem 6.1E

Requirement – 1

To determine

Accrual basis of accounting:

Accrual basis of accounting means the revenues, and their related expenses of the business are reported during the period in which the event occurs, even if the cash is not exchanged.

The revenue recognition principle:

The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation (sales or services) of the company is completed.

To describe: The five key steps to applying the revenue recognition principle.

Requirement - 2

To determine

To describe: The indicators that control has passed from the sellers to the buyer (point of revenue recognition).

Requirement - 3

To determine

To describe: The circumstances can sellers recognize revenue over time.