中级财务会计英文ch_001.ppt

1、,Revenue Recognition,Chapter 12,Intermediate Accounting12th EditionKieso,Weygandt,and Warfield,Prepared by Coby Harmon,University of California,Santa Barbara,Apply the revenue recognition principle.Describe accounting issues for revenue recognition at point of sale.Apply the percentage-of-completion

2、 method for long-term contracts.Apply the completed-contract method for long-term contracts.Identify the proper accounting for losses on long-term contracts.Describe the installment-sales method of accounting.Explain the cost-recovery method of accounting.,Learning Objectives,RevenuesInflows of asse

3、ts or settlements of liabilities during a period from delivering or producing goods or services.ExpensesOutflows of assets or incurrence of liabilities during a period from delivering or producing goods or services.,Concepts,Recognition is the process of formally recording and reporting items in the

4、 financial statements.,Revenue Recognition,DefinitionIs the item an asset,liability,equity,revenue,expense,gain,or loss?MeasurabilityDoes it possess the attributes that permit reliable measurement?RelevanceWill it make a difference to the decision maker?ReliabilityIs it a faithful representation?,Re

5、venue Recognition,Revenue should be recognized in the financial statement when.It is earned,and It is realized or realizable.,Revenue Recognition,Revenue is earned when the earnings process is completed or virtually completed.Revenue is realized when cash is received.Revenue is realizable when claim

6、s to cash are received that can be converted into a known amount of cash.,Revenue Recognition,The economic substance of the event takes precedence over the legal form of the transaction.The risks and benefits of ownership have been transferred to the buyer.The collectibility of the receivable from t

7、he sale is reasonably assured.,The decision as to when to recognize revenue focuses on three factors:,Revenue Recognition,Revenue recognizedAt delivery(point of sale)After deliveryBefore delivery of product or service,Revenue Recognition,Revenue is earned and realized at the point of sale.The produc

8、t or service has been delivered to the customer and cash has been received or is receivable.This method is sometimes called the“sales method”or“delivery method.”,Revenue Recognition Point of Sale,Accounting for long-term construction contractsCompleted-Contract MethodPercentage-of-Completion Method,

9、Revenue Recognition Before Delivery,Percentage-of-completion method is appropriate when.-Contract specifies the amount of consideration to be exchanged and the terms of settlement.-Buyer is expected to satisfy the obligation.-Contractor can perform according to the terms of the contract.,Revenue Rec

10、ognition Before Delivery,Input MeasuresEffort devoted to project compared to total effort expected(cost incurred to date compared to total estimated costs)Output MeasuresResults to date compared to total results,Measuring Progress Toward Completion,Cost-to-Cost Method,Total costs incurred to date Pe

11、rcent complete=Most recent estimate of total costs of the project,Measuring Progress Toward Completion,Cost-to-Cost MethodCurrent Period Revenue Total Revenue from Contract Percent Complete Total Revenue to Recognize-Revenue Recognized in Prior Periods Revenue Recognized in Current Period,Measuring

12、Progress Toward Completion,A)Prepare the journal entries for 2007,2008,and 2009.,Casper Construction Co.,Percentage-of-Completion Method,Illustration:,Percentage-of-Completion Method,Illustration:,Percentage-of-Completion Method,Illustration:,Percentage-of-Completion Method,Illustration:,Companies r

13、ecognize revenue and gross profit only at point of salethat is,when the contract is completed.Under this method,companies accumulate costs of long-term contracts in process,but they make no interim charges or credits to income statement accounts for revenues,costs,or gross profit.,Completed Contract

14、 Method,Completed Contract Method,Illustration:,Illustration:,Completed Contract Method,Long-Term Contract Losses,Two Methods:Loss in the Current Period on a Profitable ContractPercentage-of-completion method only,the estimated cost increase requires a current-period adjustment of gross profit recog

15、nized in prior periods.Loss on an Unprofitable ContractUnder both percentage-of-completion and completed-contract methods,the company must recognize in the current period the entire expected contract loss.,Illustration:Loss on Profitable Contract,Long-Term Contract Losses,b)Prepare the journal entri

16、es for 2007,2008,and 2009 assuming the estimated cost to complete at the end of 2008 was$215,436 instead of$170,100.,Casper Construction Co.,Long-Term Contract Losses,Illustration:Loss on Profitable Contract,Long-Term Contract Losses,Illustration:Loss on Profitable Contract,Illustration:Loss on Unprofitable Contract,Long-Term Contract Losses,c)Prepare the journal entries for 2007,2008,and 2009 assuming the estimated cost to complete at the end of 2008 was$246,038 instead of$170,100.,Casper Const