Changes

In accounting, Revenue also includes the price of services sold (a CPA's fees, for example) and can also include the percentage of completion method whereby Revenue is recognized based on the completion of certain milestones in a long term project.

In accounting, Revenue also includes the price of services sold (a CPA's fees, for example) and can also include the percentage of completion method whereby Revenue is recognized based on the completion of certain milestones in a long term project.

Theoretically, revenue should only be recongized when the following criteria are met:

Theoretically, revenue should only be recognized when the following criteria are met:

1.  The final price can be reasonably determined

1.  The final price can be reasonably determined

2.  The costs associated with producing this revenue can be easonably determined.

2.  The costs associated with producing this revenue can be reasonably determined.

3.  The product or process is complete (or milestones have been reached)

3.  The product or process is complete (or milestones have been reached)

4.  There is reasonable expectation of payment from the customers within normal terms of trade.

4.  There is reasonable expectation of payment from the customers within normal terms of trade.

Many accounting abuses by corporations relate to improper revenue recognition.  These can be from relatively simple frauds, such as recording a sale where the product has not been shipped, to relatively complex frauds involving manipulation of asssumptions under percentage of completion methodologies.

Many accounting abuses by corporations relate to improper revenue recognition.  These can be from relatively simple frauds, such as recording a sale where the product has not been shipped, to relatively complex frauds involving manipulation of assumptions under percentage of completion methodologies.

 

[[Category:Economics]]

[[Category:Economics]]