Revenue Recognition Flashcards
Which of the following statements is not correct:
A. Revenue recognition is the determination of the point and the amount at which income is accounted for.
B. Income should not be accounted for unless inflow of economic benefit is probable and the amount thereof may be estimated reliably.
C. Income should not be accounted for unless it is received in cash
D. A sale made subject to the customer right to return within a week should not be recognized as income until that week is over.
C is false. Under the accrual concept, revenue can be recognized normally on the issue of an invoice when a trade receivable is created.
It is usual for a retail shop to recognize revenue when:
A. The goods have been delivered to the customers’ premises.
B. The customer becomes legally obliged to pay for the goods.
C. The goods for sale have arrived from the supplier.
D. The customer pays for the goods sold.
B
Which of the following statements is not correct:
A. Problems of revenue recognition would not have arisen if accounting applied the venture concept or only upon receipt in cash of all amounts earned.
B. The sale of an item with a warranty to restore it to workable condition up to a year after sale may be recognized as income if the commitment invol
C. No income is recognized unless its amount is established objectively.
D. Exchange of items of similar nature and value is recognized as a transaction and income thereon is recognized.
D is false. Exchange of goods of similar nature is not recognized as income because there is no added value.
