Revenue Essay Example | Topics and Well Written Essays - 1250 words

tax - Essay ExampleIncome encompasses both revenue and gains. (ec.europa.eu, p. 2) Revenue IAS 18 defines revenue as the gross inflow of economic benefits during the period arising in the course of the mean(a) activities of an entity when those inflows result in increases in equity, other than increases relating to contributions from equity participants (ACCA, 2013.) Gain An increase in the value of an summation or property. A gain arises if the selling or disposition price of the asset is higher than the headmaster purchase or acquisition price (Investopedia, n.d.) Normally the word profit is used in line of reasoning context in the place of gain. It is also very important that that revenue and the related expenses should be matched with the business relationship period, and this is called matching principle. When the selling price of a product includes an identifiable mensuration for subsequent servicing that amount is deferred and recognised as revenue over the period durin g which the service is performed. The amount deferred is that which will cover the evaluate costs of the run, together with a reasonable profit on those services (ACCA 2013). ... sale and repurchase should be dealt with together. Section 14 of IAS 18 stipulates the conditions for revenue recognition in respect of sale of goods. These following dickens conditions are relevant for discussion in respect of accounting of execution related to Witney. (a) the entity has transferred to the buyer the fundamental risks and rewards of ownership of the goods (b) the entity retains uncomplete continuing managerial involvement to the degree usually associated with ownership nor effective take over the goods sold Section 20 states When the outcome of a transaction involving the rendering of services spate be estimated reliably, revenue associated with the transaction shall be recognised by reference to the stage of completion of the transaction at the end of the reporting period. This pri nciple is relevant for discussion in respect of support services to PC4U. Case Study Sale of electrical goods When sale has been accounted properly, the goods covered should not be treated as stock and the sale is not treated as stock by the company. Snowfall and delay in delivery cannot alter the position. Once the goods are despatched to the buyer, the seller has no control over the same. The following conditions u/s 18 are important in this respect (a) the entity has transferred to the buyer the significant risks and rewards of ownership of the goods and (b) the entity retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold. Therefore, no adjustment is required on account of this transaction. Contract with Witney The total amount owing to Ibi Ryan from Witney is ?600,000 at thirty-first March. It is assumed that includes the sum