Why is the point of sale usually used as the basis for timing of revenue recognition?

The revenue recognition concept states that revenue should be recorded in the same period as the cash is received?

False Because it determines when revenue is credited to a revenue account. Cash method means the transaction is reported when cash is received, but the revenue recognition concept means a transaction is reported as a sale even if no money has been paid. Cash basis does not recognize payable or receivable accounts.

What is cash basis of accounting?

a system that recognizes revenue and expenses on a cash basis, not an accrual basis

Sales revenue is recognized in the period in which?

Under the Accruals basis of accounting, Sales Revenue is recognised when it is earned and not when received.

What is incremental working capital?

Incremental working capital is the money needed to run the business on a day to day basis. It is usually represented as a percentage of the total business revenue.

The accrual basis of accounting requires revenue be recorded when cash is received from customers?

False. Under the accrual basis of accounting, revenue is recorded when earned, not necessarily when cash is received. Revenue is earned when a sale is made, whether the customer pays cash or makes the purchase on account.

Theoretical basis for the allocation of expenses?

Systematic allocation cause and effect immediate recognition

How modified accrual basis of accounting differs from accrual accounting?

The main difference between cash, accrual, and modified accrual accounting is the timing of the recognition of revenue and expenditures. A cash basis of accounting revenue doesn't necessarily mean customers have to pay cash and you have to pay cash for goods and services. It means that revenue isn't recognized (i.e. reported) on your income statement until payment is received from the customer and expenditures aren't recorded on your income statement until you pay for goods or services. With accrual accounting, revenue is recognized when earned and measurable (usually evidenced by delivery of goods or services to a customer and issuance of an invoice for same). Expenditures are recognized when the liability is incurred (usually measured by receipt of goods or services rendered). There are exceptions to the "recognition of expenditures when liability is incurred" (1) operating leases are off-balance sheet financing and only lease payments are recorded as they become due (2) interest on long-term debt is only recognized at each due date (3) inventory and supplies - the value is carried as an asset on your balance sheet but expenditures are not recognized until the inventory is sold or the supplies are used. (4) encumbrances are future liabilities but are not expensed until incurred. Modified accrual accounting is a hybrid of cash and accrual methods. Revenue is recognized when earned, measurable, AND available. Expenditures are still recognized when the liability is incurred.

What practice is when letting the expense follow the revenue?

This is the Accrual basis accounting method, which uses the matching principle (expenses following revenue) to record expenses when they are incurred, and revenue when it is earned (not on the date when cash is received or paid out).

What methods of accounting is revenue recorded ONLY when cash is received?

The Cash Basis Accounting method is the method used to record income (revenue) ONLY when cash is received and expenses ONLY when cash is paid out. Cash Basis Accounting does not conform to the GAAP and is not considered a practical accounting method.

Is posting from a revenue journal to the customer account normally only done at the end of the month?

no it is done on a regular basis

What is mahalwary system?

The English introduced in 1822 a new land settlement on a temporary basis,so far as revenue was concerned.It was introduced in the Gangetic valley,North-West Provinces,parts of Bengal and Bombay,parts of Punjab and parts of central India.Under this system Mahals(group of villagers) were created as community blocks.They were held responsible for the collection of land revenue from their respective Mahals or blocks.Moreover, the land revenue was also reviewed on the basis of the produce of a mahal.

Why is the point of sale usually used as the basis for timing of revenue recognition?

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Why is point of sale usually used as the basis for the timing of revenue recognition?