Essays on Revenue Recognition

WT Grant Company was known as the largest retail company in the urban areas of the United States. The main reason for the success of the company was its low-cost chain as compared to its competitors in the US market. The company liquidated due to its ineffective strategy to counter the competitive environment factors prevailing in the market. The major causes of the company’s failure in the market are mentioned below.

Financial Distress

It was the main reason for the failure of WT as it was unable to remain financially strong and increased credit risks to a high extent. The ...

Accounting Standards and Regulations

Part a - AASB 15 Revenue from Contracts with Customers This accounting standard is addresses organisations’ concerns to recognise, measure and disclose revenue using a five step process. Applicable from January 01, 2014, this standard was issued in May 2014. As per this standard, which will replace AASB 111 and AASB 118, organisations can recognise revenue or income even though the products and services are not yet delivered to customers. In other words, companies can record the recognition of the payment (service income) even when the entity has not yet provided goods and services. As per this standard, revenue ...

Economic income is susceptible to changes that result from several factors some of which include: the level of inflation whereby high inflation decreases economic income by increasing its volatility. The existing tax rate in an economy also has an influence on the financial income. This is because low tax increases the disposable incomes. The primary factor leading to a change in the taxable incomes in an economy is the inflation adjustments. Notably, inflation has the propensity of increasing the costs of commodities and services. To ensure the society keeps pace with these changes, adjustments must be to particular deductions, ...

[Accounting]

Normally, the income should not be registered unless it is received. When recoding the revenue, we should incorporate several factors, such as: products are delivered and accepted, services are performed, entitled to payment is reasonably expected to be collected. Firms usually indicate their revenue recognition policy in the notes to the financial statements. Deviations from the “standard” revenue recognition principle are not unusual. There is a need to pay attention to brokerage warnings in the firm’s stock. Revenues should be recorded in several cases: services are still staying to be given; shipment of goods has not occurred; ...

Introduction

The Financial Accounting Standard Board (FASB) is an independent board that incorporates different professionals who are mandated with the responsibility of communicating appropriate standards used for financial accounting and reporting purposes. The concept is referred to as the Accepted Accounting Principles (GAAP) and is often used by organizations in the preparation of financial reporting. Existing standards in FASB face a lot of criticizing for failing to meet the needs of users more effectively as far as financial reporting is considered. The reason why the facets are considered inappropriate and should be amended is that they are not a faithful ...

General accepted accounting standards (GAAP) are acceptable framework and guidelines in accounting practice, used by professional accountants to record financial statements and position of a company. Therefore, this comprises of accounting and reporting standards, meant for both profit oriented firms and non-profit-oriented firms. On the other hand, according to (ken,2013) International Financial Reporting Standard (IFRS) is a global business language used in company circles so that their accounting documents and reporting are standardized. This, therefore, means that they are somewhat comparable across the industry, hence shareholder and stakeholders can make educated investments decision. IFRS is commonly used for ...

Introduction: Accrual and Cash basis of accounting are the two methods of making a record of the business transactions in the organization’s records. According to Rich, Jones, Mowen & Hansen (2012) “Under Cash basis accounting, revenues and expenses are recorded when cash is received or paid regardless of when the revenues are earned or the expenses are incurred. Accrual basis accounting; links income measurement, to the selling activities of a company by recognizing revenues and expenses when they occur” (p. 135). The accrual basis of accounting adheres to the revenue recognition and expense recognition principle as laid down by the ...

Accrual and cash basis differs in regard to recognition of revenue as well as expenses of a business. Cash basis recognizes income when cash is received. For example, when goods are sold at a profit the profit will be recognized when the buyer pays for the goods. Therefore, if a company uses cash basis of recording trasactions, when credit sales are made it is impossible to recognize any profit to be obtained from such sales till the time customer pays. In addition, cash basis requires expenses to be first paid then recorded. This means that any expense incurred and not immediately paid ...