What if the there is a warranty or maintenance given with product? When will revenue recognition will happen for the warranty or maintenance? The year in which the service is given or in the same accounting period?
Under the matching principle of accounting, the estimated cost of honoring the warranty should be recognized in the period that the sales occur. IFT Support Team
Many thanks for this great video, in 15 min I am still confused why incremental cost should be recognised as an asset it counter intuitive as it is a cost it should be a liability.
its because its a cost, cost means you pay/accuire something in order to produce products/services. like a basic material in manufacturing, you capitalize basic material cost as part of the final product which is an inventory asset
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What if the there is a warranty or maintenance given with product? When will revenue recognition will happen for the warranty or maintenance? The year in which the service is given or in the same accounting period?
Under the matching principle of accounting, the estimated cost of honoring the warranty should be recognized in the period that the sales occur.
IFT Support Team
Sir u have skipped revenue recognition methods los, I see them on cyllabus any reason?
Revenue recognition is discussed in section 3.
IFT Support Team
Can u please explain what is meant by the company will not have to reverse cumulative revenue
Cumulative revenue = (Cost incurred to date ÷ Total estimated cost) x contract price
IFT Support Team
Many thanks for this great video, in 15 min I am still confused why incremental cost should be recognised as an asset it counter intuitive as it is a cost it should be a liability.
Expense which is to be recovered in the future
its because its a cost, cost means you pay/accuire something in order to produce products/services. like a basic material in manufacturing, you capitalize basic material cost as part of the final product which is an inventory asset
Great job
Thank you
IFT Support Team
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