Week 8: Revenue Recognition

Question 1

What is Revenue

Answer 1

• Income arising in the course of an entity’s ordinary activities
• Represents economic benefits
• Form of inflows or enhancements

Question 2

Five step model for delivering core principles (5)

Answer 2

1) Identify the contracts with a customer
2) Identify performance obligations in the contract
3) Determine the transaction price
4) Allocate transaction price
5) Recognise revenue when the entity satisfies a performance obligation

Question 3

Accounting Entries: Cost incurred on a contract

Answer 3

Decrease (CR) Asset Cash

Increase (DR) Contract Asset

Question 4

Accounting Entry: Customer making progress payments

Answer 4

• Increase (DR) Asset Cash

- Increase (CR) Contract Liabilities