Revenue

Running Head : Accounting

Accounting

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According to Schweser (2008 , As a broad framework , international accounting standards and U .S GAAP itself recommends that when revenue recognition is made for the rendering of services , it is important that companies adhere to the stage of completion also known as percentage of completion method (P . 45 . Under this method , revenue is recognized in the accounting periods in which the services are rendered . The recognition of revenue on this basis provides useful information on the extent of service

activity and performance during a period . When the outcome of the transaction involving the rendering of services cannot be estimated reliably , revenue shall be recognized only to the extent of the expenses recognized that are recoverable

Hence , if a website developer has a contract to develop a website and also provide web hosting services for the next two years and receives cash in advance for it with the expectation that the web site will be completed in this accounting period only , then it is prudent that the firm only recognizes the percentage of web hosting fee utilized in the current accounting period along with web site development charges as revenue at the end of the year and recognize the remaining cash received as deferred revenue

Therefore , it seems prudent to argue that although the article does not give more details with regard to revenue recognition policies of these companies , readers of financial statements should be careful when analyzing the financial statements...