ACC 100 Chapter Notes -Matching Principle, Income Statement, Revenue Recognition

• School: Ryerson University
• Department: Accounting
• Course: ACC 100
• Professor: Else Grech

Document Summary

Revenues: increases in economic resources by other entities (sales) Revenue recognition principle: revenue is recognized when it is earned on an is sheet. There are 3 guide lines regarding revenue recognition: performance is achieved. The service/ product must be recognized by both parties: amount is reasonably measured. There must be a predetermined price or price range in place: collection of cash is insured. You must either have collateral or an accounts receivable on account. In this industry (manufacturing) the most common revenue recognition is by using time-of-sale method. The manufacture makes a product/service, a price is then agreed upon for a quantity, ownership is give and cash/accounts revivable is received. Percentage-of-completion method allows a contractor to get paid when certain checkpoints, or percentages of a service/product is completed. They will be paid a sum agreed upon in instalments over the period of the project. Has gained popularity in the last 30 years. These services are paid based one 2 factors.