Case Assignment

Case Assignment

Part I

According to Turner (2001) revenue recognition is a significant issue because one it is the largest item indicated on the balance sheet, second investors make their decision on the basis of the revenues show in the income statements, third for international companies it is important to avoid to show their revenues in the income statement after they have been realized or earned and fourth significance of revenue recognition is that it ensures compliance with the accounting literature of the firm.

In order to determine when revenues are recorded for the accounting purpose the following need to follow: a) revenue needs to be recorded that has been earned from the sale of products and services of a firm; 2) revenues should be recorded for the accounting purpose earned from the contractual activities of the company; 3) there are several internal charge backs through which revenues are earned for example cafeteria; 4) revenues earned from the use of facilities and 5) revenues are also earned and recorded from the different revenue programs.

According to Weygandt (et al., 2009) product expenses are those which are associated with the development of the finish and selling of the goods of a firm. The product cost is also called inventorial cost or expense but under the matching principle this cost does not converts into an expense till the product has not been sold. All the product cost turns into product expense when the finished goods are sold. On the other hand period cost or expense arises on specific time periods and is not associated with the sale of the products. The period expenses are non-manufacturing expenses like marketing, advertising, selling and distribution and etc.

Matching Principle for revenue accounting emphasize on recording the expenses along with recording of the revenues. The matching principle shows a ...