CH02_Part2 - Income Recognition Recognition Making an entry...

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Chapter: 02 1 Recognition → Making an entry to record a transaction or an event. In real world, “all changes in the economic value of a firm” are not reflected. Reporting cash inflows and outflows is reliable but is often not relevant for predicting future cash flows. Income Recognition
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Chapter: 02 2 Income Recognition (Contd.) Approach 1 Approach 2 Approach 3 Reliability Vs Relevance Maximum Reliability and Verifiability Maximum Relevance and Timeliness Valuation Approach Historical Value Current Value Recognition in Balance Sheet When realized in market transaction When changes occur over time When changes occur over time Recognition in Income Statement When realized in market transaction When realized in market transaction When changes occur over time Nature Traditional Hybrid Conservative
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Chapter: 02 3 Income Recognition (Contd.) Approach 2 Hybrid of Approaches 1 and 3. An attempt to incorporate the benefits of
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CH02_Part2 - Income Recognition Recognition Making an entry...

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