Chapter5Sales Revenue, Cash, andAccountsReceivableRecognitionof salesrevenueMeasurement of sales revenueCashandaccountsreceivableMeasurement of uncollectible accounts
Chapter 5 Sales Revenue, Cash, and Accounts Receivable Recognition of sales revenue Measurement of sales revenue Cash and accounts receivable Measurement of uncollectible accounts
RecognitionofSalesRevenueTheImportanceofRecognitionTwo Criteria of Revenue recognitionApplications of The Criteria
Recognition of Sales Revenue The Importance of Recognition Two Criteria of Revenue recognition Applications of The Criteria
Why is the timing of revenuerecognition important?Becauseit is critical to themeasurement of net income
Why is the timing of revenue recognition important? Because it is critical to the measurement of net income
Some users of financial informationwant revenues to be recorded as soonaspossibleOthers want to be sure that a companywill actually receive payment beforerevenues arerecordedAccountants must carefully assess whenrevenue shouldberecognized
Some users of financial information want revenues to be recorded as soon as possible. Others want to be sure that a company will actually receive payment before revenues are recorded. Accountants must carefully assess when revenue should be recognized
Under accrual-basis accounting, recognition ofrevenue requires a two-pronged test:(1) goods or services must be delivered to thecustomers ( that is , the revenue is earned);(2) cash or an asset virtually assured of beingconverted into cash must be received (that istherevenueisrealized)
Under accrual-basis accounting, recognition of revenue requires a two-pronged test: (1) goods or services must be delivered to the customers ( that is , the revenue is earned); (2) cash or an asset virtually assured of being converted into cash must be received ( that is , the revenue is realized)