Scribd Logo
Upload

Welcome to Scribd!

  • The Time of Revenue Recognition: Exceptions General Rule

    Uploaded by

    Ny Nguyen
    7 views7 pages
    The document discusses the general rule and exceptions for revenue recognition. The general rule is that revenue is recognized when a company delivers or performs its product or service and receives payment. There are three exceptions where revenue may be recognized before or after the sale: 1) Revenues not recognized at sale, such as with buyback agreements or returns, 2) Revenues recognized before sale, like with long-term contracts or agricultural/mineral products, 3) Revenues recognized after sale using methods such as installment sales, cost recovery, or deposits.

    Original Description:

    Original Title

    Accounting

    Copyright

    © Attribution Non-Commercial (BY-NC)

    Available Formats

    PPTX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document
    The document discusses the general rule and exceptions for revenue recognition. The general rule is that revenue is recognized when a company delivers or performs its product or service and receives payment. There are three exceptions where revenue may be recognized before or after the sale: 1) Revenues not recognized at sale, such as with buyback agreements or returns, 2) Revenues recognized before sale, like with long-term contracts or agricultural/mineral products, 3) Revenues recognized after sale using methods such as installment sales, cost recovery, or deposits.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    7 views7 pages

    The Time of Revenue Recognition: Exceptions General Rule

    Uploaded by

    Ny Nguyen
    The document discusses the general rule and exceptions for revenue recognition. The general rule is that revenue is recognized when a company delivers or performs its product or service and receives payment. There are three exceptions where revenue may be recognized before or after the sale: 1) Revenues not recognized at sale, such as with buyback agreements or returns, 2) Revenues recognized before sale, like with long-term contracts or agricultural/mineral products, 3) Revenues recognized after sale using methods such as installment sales, cost recovery, or deposits.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 7

    The Time of Revenue Recognition

    General Rule Exceptions


    Revenues not recognized at Sale

    Revenues recognized before Sale


    Revenues recognized after Sale
     
    General Rule
    For most businesses, revenue is recognized
    whenever the company :

    delivers or performs its product or service

    receives payment for product or service

    www.themegallery.com Company Logo


    Exceptions

    Revenues not recognized at Sale

    Revenues recognized before Sale

    Revenues recognized after Sale


    Revenues not recognized at Sale

    Buyback agreements Returns

    A company sells a A company which can not


    product and agrees to estimate the amount of future
    buy it back after some returns should recognize
    time. If buyback price revenues only when the right
    covers all costs of the to return ends.
    inventory plus related A company which can
    holding costs, the estimate the number of future
    inventory remains on returns can recognize
    the seller’s books. revenues at the point of sale.

    Company Logo
    Revenues recognized before Sale
    Completion of
    Long-term contracts
    production basis

    Allows the builder (seller) to bill the Allows recognizing revenues even if
    purchaser at various parts of the no sale was made.
    project (e.g. every 10 miles of road This applies to agricultural products
    built). and minerals because (1) there is a
    Ex: Contracts concern with ready market for these products
    constructions, development of with reasonably assured prices, (2)
    aircraft, weapons, and space the units are interchangeable, and
    exploration hardware . (3) selling and distributing does not
    involve significant costs.

    www.themegallery.com Company Logo


    Revenues recognized after Sale

    Installment Sales M Cost Recovery Meth


    ethod od Deposit Method

    ●
    The unearned income is
    ●
    Under this method no ●
    This method is used when
    deferred and then profit is recognized until the company receives cash
    cash collections exceed the
    recognized to income before transfer of
    seller’s cost of goods sold.
    when cash is collected. ownership occurs.
    ●
    For example, if a company
    ●
    For example, if a company ●
    Revenue is not recognized
    sold a machine worth
    collected 45% of total because the risks and
    $10,000 for $15,000, it can
    product price, it can start recording profit only rewards of ownership
    recognize 45% of total when the buyer pays more have not transferred to
    profit on that product than $10,000. the buyer.

    You might also like