MGMT 120A Lecture Notes - Lecture 5: Credit Risk, Contract, Co-Fired Ceramic
Document Summary
Training 3 part 1: chapter 5 revenue recognition. Revenue recognition principle (starting in 2017 these rules will all be changed but a lot of the new rules will be based off of these so they are still important!) Revenue is recorded when earned and realized (or realizable: realized/realizable: you are reasonably certain of the collection and the amount of cash can be measured. So basically you can record revenue when you have done your part (earned) and the other person has paid you or is about to pay you. In order of shortest time to longest for long term construction costs (ltcc): % of completion, accrual accounting: Completed contract: collection uninsured (tax purposes) Types of revenue recognition methods: completed contract method- recognize the ltcc when you complete it, % of completion method- it has nothing to do with cash, only cares about how much is done. Amount to recognize = recognize cash received * (gross profit %)
