From the course: Finance and Accounting Tips

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Timing of revenue recognition

Timing of revenue recognition

From the course: Finance and Accounting Tips

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Timing of revenue recognition

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- Revenue recognition, when to report revenue, has been one of the hottest topics in accounting and business in recent years. Revenue recognition is the process of deciding when a sale should be reported in a company's accounting records. When has the company performed enough activity to merit reporting a sale, and when has the company become convinced that the customer is going to pay for that good or service. A company reports revenue when it has delivered economic value and has an assurance that is has received, or will receive, the cash. Now, let's think about a hypothetical Kamila company, a company that makes and sells industrial equipment. And, let's look at a sequence of five events, in order, with respect to the sale of one piece of equipment by Kamila to a customer for $100,000.00. These events occur over the course of almost a year. The accounting issue is simple. When should Kamila, the selling company, report this $100,000.00 sale in its accounting records. The reporting…

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