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week 2 topic 1 review Review post minimum of 150 words apa format
Review post minimum of 150 words apa format
Revenue, simply, is the receipt of cash or accounts receivable (if, on credit), at an agreed upon price, in exchange for goods or services. Recognizing this revenue is the standard of accounting that allocates revenue in the proper time periods. Prior to this year, revenue recognition was based on the "realization principle". Revenue was recognized when there was a reasonable certainty the payment would be collected and the earning process was complete. This principle focused primarily on one point in time. Recent changes and updates, (ASU-2014-09), public companies can now allocate portions of revenue throughout the life of a contract. This particular update affects the industry I currently am employed in., Insurance. As insurance policies are entered into a system. The policies typically are one year in length, and portions become earned (for the carrier) as they age throughout the year. Revenue can be recognized, for example, 1/12 at a time for monthly plans, 1/4 at a time for quarterly. It is important to note that policies, regardless of payments,(including prepayments, will age/mature at the same rate. However, non payment of premium can result in cancellation of the policy effective on the date the payment was due.
Spiceland, Sepe, Nelson, Thomas, Intermediate Accounting, Eighth Edition, Chapter 5, pgs 230-236