Chapter 5 notes

Chapter 5 notes - Chapter 5 Income Measurement &...

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What is Revenue? Revenue recognition criteria help ensure that an income statement reflects the actual accomplishments of a company. Tracks the inflows of net assets from providing goods or services to customers Reflects positive inflows from activities that ultimately generate cash flows Helps users better assess future activities and therefore future cash flows According to FASB, “revenues are inflows or other enhancements of assets of an entity or settlements of liabilities from delivering or producing goods, rendering services, or other activities that constitute the entity’s ongoing major or central operations. Why is timing of revenue recognition important? Matching principle Proper cut-off should be made each period The realization principle requires that two criteria be satisfied before revenue can be recognized: 1. The earnings process if judged to be complete or virtually complete.
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This note was uploaded on 02/07/2012 for the course ACG 4101 taught by Professor Lin during the Spring '09 term at FIU.

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Chapter 5 notes - Chapter 5 Income Measurement &...

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