Download presentation
Presentation is loading. Please wait.
Published byJennifer Boone Modified over 8 years ago
1
16.1PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. ACCOUNTING Financial and Organisational Decision Making Chapter 16 Revenue Slides written by Sandra Porritt designed by Tony Van Eekelen
2
Chapter 16: Revenue 16.2 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Learning Objectives In this chapter you will be introduced to: –the nature of revenue –the various points at which revenue could be recognised –the criteria for the recognition of revenue
3
Chapter 16: Revenue 16.3 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Learning Objectives –the diversity of generally accepted practices across different industries with respect to the recognition of revenue
4
Chapter 16: Revenue 16.4 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. –the importance of the timing of the revenue recognition in assessments of the performance and flinancial position of entities Learning Objectives
5
Chapter 16: Revenue 16.5 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Introduction when to recognise revenue or income when uncertainty is eliminated
6
Chapter 16: Revenue 16.6 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Revenue defined SAC4 in Australia provides the following definition: ‘Revenues’ are inflows or other enhancements, or savings in outflows, of future economic benefits in the form of increases in assets or reductions in liabilities of the entity, other than those relating to contributions by the owner, ……………...
7
Chapter 16: Revenue 16.7 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Alternative points for revenue recognition revenue recognised in the period in which it is earned all activities of the business contribute to the earning of revenue verifiable evidence of the amount of revenue
8
Chapter 16: Revenue 16.8 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Verifiable evidence external sales tranaction use of judgement
9
Chapter 16: Revenue 16.9 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Example Recognition of revenue at different points –production –sales –collection of payment
10
Chapter 16: Revenue 16.10 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. The recognition of revenue need to recognise revenue at the moment it is accomplishd need for reliability use of inductive reasoning as it is the study of an existing system
11
Chapter 16: Revenue 16.11 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. External transaction test Revenue recognised immediately –retail credit sales –sales under warranty –perform service and invoicecustmer –primary production for marketing board, selling price is known
12
Chapter 16: Revenue 16.12 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. external tranaction test continued Revenue denied at present –increase in market value of asset –advance sales of magazinesubscription –sales order received with deposit –sales on approval –sales where collection dubious
13
Chapter 16: Revenue 16.13 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Realisatation conversation of asset to cash or claim to cash recognition will be a point in the operating cycle at which it is deemed appropriate to recognise revenue
14
Chapter 16: Revenue 16.14 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Resolution of uncertainty before uncertainty is resolved, a change in net assets must be measurable and it must be permanent to be measurable a change must be verifiable to be permanent the change must be unlikely to be reversed
15
Chapter 16: Revenue 16.15 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Some applications Increases in values of assets Instalment sales or real estate Hire-purchase transactions Long-term construction projects
16
Chapter 16: Revenue 16.16 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Increases in values of assets Until an asset is sold the is uncertainity as to the amount of the gain - will it be permanent
17
Chapter 16: Revenue 16.17 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Instalment sales or real estate The sale method The installment method The cost recovery method
18
Chapter 16: Revenue 16.18 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Hire-purchase transactions and similar financing arrangements payment by installments ownership is not obtained until payments have been completed
19
Chapter 16: Revenue 16.19 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Long-term construction projects sometimes over a number of years common to allocate revenue over the projects life percentage of completion method which attempts to take in account progress during each period of the contract
20
Chapter 16: Revenue 16.20 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Ethical issues When revenue is recognised can advantage a business When is uncertainty resolved
21
Chapter 16: Revenue 16.21 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Summary nature of revenue and its recognition criteria uncertainty resolution involves judgement differences of opinion will be inevitable
Similar presentations
© 2024 SlidePlayer.com Inc.
All rights reserved.