Week 2_ Dis 1

Ameshia,

Revenue recognition principles are practiced when revenues are earned and realized, not necessarily received. Realizable means that the goods and/or services have been received. However, payment for the product/services is expected later. One example of this revenue recognition principle would be a contractual agreement to purchase a vehicle that is being financed. The car is sold to the purchaser with the intent that the money will be received later through monthly payments. Revenue becomes realized and earned once the sales transaction has been completed instead of after the purchase has been paid off. The car is taken out of inventory and recorded as sold.

In this case, the expense recognition would be revenue that is recorded during the time period the vehicle was purchased. The buyer purchases the vehicle in July then the expense would be recorded as revenue during July's accounting period. If not, the expenses may be incurred, or follow the period in which the related amount of revenue is recognized. Expense recognition is met once all expenses have been recorded for that accounting period.

Reference:

Expense recognition principle--Accounting tools. (2019, January 9) retrieved from https://www.accountingtools.com/articles/expense-recognition-principle.html

When Should a Company Recognize Revenues on Its Books?--Corporate Finance & Accounting. (2019, April 22) retrieved from https://www.investopedia.com/ask/answers/06/recognizingrevenues.asp

Damian

Revenues are realized or realizable when a company exchanges goods or services for cash or other assets. So if a business enters into a transaction to sell inventory to a customer, the revenue is realizable a specific amount of cash is identified in the transaction. The revenue is not recorded, however, until it is earned The last exception to the revenue recognition principle is companies that recognize revenue when the cash is actually received. Example, Three ponds of cement cost $550 for 16 bags to to pave a drive way but only 13 bags was delivered and 3 bags was damaged so the tree bags that was damaged as credit with an extra 5 bags of cement the order was incorrect but to keep the customer they way rewarded extra.

The expense recognition principle states that expenses should be recognize in the same period as the revenue to which they relate. If this were not the case, expenses would likely be recognized as incurred, which might predate or follow the period in which the related amount of revenue is recognized.

Reference:

Revenue Recognition Principle | Examples | My Accounting Course. (n.d.). Retrieved from https://www.myaccountingcourse.com › Accounting Principles

Expense recognition principle — AccountingTools. (2019, January 9). Retrieved from https://www.accountingtools.com/articles/expense-recognition-principle.html