Research Paper Help on Revenue Recognition

Revenue Recognition

Revenues are recognized through standards, such as international accounting standard board and financial accounting standard board. Revenue in this case is realized through the following process. The first step is to identify possible contracts with potential customers. This is where customers who are potentially capable and willing to enter into a contract show some interest. The second step is to ensure that separate obligations are identified. The business enterprise is specific about the needs it aspires to solve. The third step is to ascertain the price involved in the delivery of the contract. The forth step is to apportion each obligation with its own price so that a person is in a position to approximate the overall price. Lastly, revenue is recognized after performing every obligation satisfactorily.

Contacts are important in revenue recognition because they involve different parts. When a particular step in the contract is completed, the organization recognizes revenue. This means that revenue will not be realized prior to the completion of an obligation within a contract (Beil, 2013). The company is in a position to determine the cost involved in each step by equating equivalent share. Each step is valued according to the associated benefit it contributes to the contract. An asset is defined as the activity or an obligation that earns revenue to the organization. This means that the five steps will help identify an activity as either an asset or a liability. On the other hand, a liability is what an organization owes to its creditors. In cases where the organization earns money before it delivers services or goods, it is considered a liability to the company because it owes some obligations to the customers to be performed.

References

Beil, F. J. (2013). Revenue recognition: Principles and practices. New York, N.Y.] (222 East 46th Street: Business Expert Press.