Revenue Recgoniition

What does recognizing revenue mean?

Make the journal entry

When do we recognize revenue?

When the obligation is performed not when cash is received

Step 1:

Identify the contract with a customer (can be implied)

Step 2:

Identify the performance obligation(s) in the contract

Step 3:

Determine the transaction price

Step 4:

Allocate the transaction price to each performance obligation

Step 5:

Recognize Revenue when (or as) each performance obligation is satisfied

When is it appropriate to recognize revenue?

When control of the good has passed upon the delivery (ex: buying starbucks)

Recognizing revenue over time criteria

1. Customer consumes the benefit of the sellers work as its performed (gym membership(

2. Controls the asset as its created

3. Seller is creating an asset with no alt use (custom made)