Measurement Of Revenues Assignment Help | Measurement Of Revenues Homework Help

Measurement of Revenues

The amount of revenues recognized is generally calculated by cash or cash – equivalent value of other assets (e.g. bills receivable) received from customers. This amount represents the agreed price between buyer and seller at the time of sale. This is, however, subject to certain adjustments in those cases where revenue is recognized in a period prior to the collection of cash. The adjustments are in respect of bad debts and interest on delayed payments. Regarding bad debts, logic suggests that this adjustment should be made in the period when the revenue is recognized and not in a later period when debtors are declared bad. In installment sale where the cash collection extends over several years, the selling price includes an element of interest too. Under the accrual basis of accounting, this interest element should be recognized as interest revenue during the periods between sale and collections. Thus, when cash collection is to be delayed, the measure or calculation of current revenue should be the selling price reduced to account for the interest element applicable to future periods.

For more help in Measurement of Revenues click the button below to submit your homework assignment