Recognizing Revenue and Expenses

Paper Summary:

This paper explains to a manufacturing company how each of the following recommendations for recognizing revenue and expenses will assist the organization in meeting its goals. The paper also explains why alternative revenue recognition methods were not chosen.



1) Revenue Recognition Methods

2) Expensing Recognition Methods

3) Expensing of Stock Options

From the Paper:

"There are two different ways to recognize revenues. One way is the accrual accounting method. The other way to recognize revenues involves cash basis accounting. Al Rosen writes, in "Canadian Business", that under the accrual basis for accounting, revenue is recognized when either or both of the following conditions are met: the revenue is substantially earned or the revenue is realized or realizable. In other words, revenue is earned when products are delivered or services are provided. Under the accrual basis for accounting expenses must be..."

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