Why do you think companies use revenue recognition as a primary means for inflating profits?
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Why is revenue recognition important?The revenue recognition principle, a key feature of accrual-basis accounting, dictates that companies recognize revenue as it is earned, not when they receive payment. Accurate revenue recognition is essential because it directly affects the integrity and consistency of a company's financial reporting.
What is your understanding about the revenue recognition concept explain in brief?Revenue recognition is a generally accepted accounting principle (GAAP) that identifies the specific conditions in which revenue is recognized and determines how to account for it. Typically, revenue is recognized when a critical event has occurred, and the dollar amount is easily measurable to the company.
What are the primary control procedures to ensure completeness of recorded revenues?what are primary control procedures to ensure completeness of recorded revenues? To ensure completeness of recorded revenue, all invoices, shipping documents, and sales orders should be prenumbered, and the numerical sequence should be checked on a timely basis.
What is revenue recognition with example?What is the Revenue Recognition Principle? The revenue recognition principle states that you should only record revenue when it has been earned, not when the related cash is collected. For example, a snow plowing service completes the plowing of a company's parking lot for its standard fee of $100.
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