Accounting Project 1

Accounting Project 1 - 1. The revenue that electric company...

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1. The revenue that electric company earned should be considered as unrecorded revenue. The company will need to make an estimation on how much it is supposed to earn based on each customer’s past consumption of electricity. By doing this, the company can roughly know its revenue for the given year. As stated in the supplementary reading, “ In the usual situation, the amount of income that can be earned can be reliably estimated when goods are delivered or service provided……Even though some customers in the normal course of business may not pay the bills, allowances can be made for this in estimating the amount of revenue.” Allowances should be made in this case, so that when the customer used less electricity than expected, an adjusting entries can be created to correct the account receivables and revenues account. 2. According to the supplementary reading, “ In licensing and similar arrangements, delivery does not occur for revenue recognition purpose until the license terms begins.” In case 2 , it is like the client provide a something similar to license for the legal firm to provide legal service for him/her. It can be considered as like insurance. Revenue for the fee should be recognized when the contract started. And at the end of 2006, 6 months (Total 12 months) have been passed in the contract start from July 1 2006 and $5000, half of the total fee, should be recognized as revenue in 2006 no matter service has been provided or not. 3.
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Accounting Project 1 - 1. The revenue that electric company...

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