Revenue recognition Essay

The main problem in this case is the treatment of 1,000,000 cash balance being held in first Brazil national bank in San Paolo. The sales of the products are required to be banked in the bank and ensure that the main balance that is being kept in the bank is not less than one million. The financial controller recognizes the balance being held in the bank as cash and equivalent in the financial statements.

To begin with, cash and revenue is by and large and recognized only when there is explicit significance event that is quantifiable. Revenue at times is recognized at a time when the company delivers or performs a service and receives a payment for it. There are also some exceptions to this rule especially when a company has a high rate of product returns and revenue in such a situation is recognized when the return period expires.

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Research strategy

There are two methods of research/ data collection in research papers:  that is quantitative and qualitative. Quantitative method is applicable where the problem is known, the problem is based on theories and can be measured in numbers. The analysis can be done on tables, graphs, pie charts, gnat charts and other statistical theories and it relies on assumptions. There are a number of methods which are under quantitative methods. These include surveys, experiments and quasi experiment. Qualitative method is different from quantitative because it is used to measure human feelings, attitudes and perceptions.

In this research question both methods will be used. This is because most data will be collected from books and history internet resources. The problem of this research question is how and which direction the research problem will take. There is always a connection between the research from the research question and the methods or the collection tools used, since it influences the conclusions and the recommendations. Qualitative method will be used to collect the writers opinions, attitudes, perceptions and feelings on the on the relationship between corporate social responsibilities and the fast food industries in the two countries.  Quantitative method will be used in collecting actual facts in numerical at the same time; analysis of the data will be done in the form of tables, graphs and other statistical tools.


It is worth noting that there are a number of alternatives available that assist in revenue recognition. According to financial accounting standards board revenue recognition.

The new task of the accountant is to verify that the revenues and expenses are attributable to the accounting period. It is the normal practice to record in the expense accounts those amounts actually paid during the period. As a result, at the end of the period, these accounts may be understated. Likewise it is possible that there may be some outstanding revenue due to the business other than sales revenue, which must be brought into the year’s income.

The accrual convention it will be recalled makes a distinction between the receipt of cash and the right to receive cash, and the payment of cash and the legal obligation to pay cash. As there is often no coincidence in time between the creation of legal rights and obligations and the transfer of cash, it follows that the accountant must scrutinize the revenue and expenses accounts to make sure that amounts due and payable are accrued. Similarly, any payments made in advance must be excluded and carried forward to the next accounting period. The adjustments are effected in the accounts themselves.

It is worth noting that some companies can from time to time play around with revenue recognition to make their fiscal figures appear worth while. The financial reporting practices of business especially in terms of their revenue reporting, their policies, are now coming under heavy and increased scrutiny. There have been a lot of scandals, splashed across the front pages of daily news and weekly magazines  in recent times, have resulted mainly from ‘synthetic inflation’ and exaggeration of revenues, reporting of gains on sales of goods and services as revenue, others include backdating of sales contracts, inappropriately created cookie jar capital, and dubious reporting methods. Whether revenue misstatement occurs by intentionally in retort to pressure to perform, or basically because of the improper understanding of the rules, terms and conditions, businesses and their advisors must be watchful to the cipher of faculty guidelines.   For example, if A, B and C Corporation wants to conceal the fact that it is having a terrible year in sales, it may choose to recognize revenue that has not yet been composed as revenue in order to improve its sales revenue for the year.

Revenue Recognition be fulfilled as stipulated below:

            “Paragraph 10. Revenue from sales or overhaul dealings should be recognized when the             requirements as to performance set out in the 11th 12th paragraph are fulfilled, provided that at         the time of performance, it is not unreasonable to expect ultimate collection. If at the time of             rising of any claim, it is perverse to expect definitive collection, revenue recognition should             be deferred.

Paragraph11. In a transaction relating the sale of goods, performance should be regarded as being achieved when the following conditions are met:

i.      the seller of goods has transferred to the buyer the possessions in the goods for a price or all significant risks and rewards of possession have been transferred to the buyer and the seller retains no successful control of the goods transferred to an extent usually allied with ownership; and

ii.    No significant improbability exists regarding the amount of the contemplation that will be delivered from the sale of goods.”

The sales by and large takes place in a variety of ways and usually is subjected to different terms and conditions as stipulated in the agreement for sale. Accordingly, the time at which all the essential risks as well as rewards of ownership which can be can be considered as transferred, is required to be determined on the basis of the terms as well as the conditions of the agreement for sale.

Work cited

Antony B. “Revenue Recognition in real estate”, Financial accounting Standards Board, 2007, pp 8-39