Topics: Revenue, Generally Accepted Accounting Principles, Financial Accounting Standards Board Pages: 2 (516 words) Published: March 3, 2013
The primary objective of this memo supports the company’s position to record four specific transactiosn questioned by an external auditing firm, Peal, Gower, and Quill. Caltron Computers operates with the upmost integrity in a financial accounting and operational basis. Creative accounting methods can inaccurately present an organization’s financial income (Laura, Dumitru, & Razvan, 2011). Our firm relies solely on revenue recognition accounting principles defined by the Financial Accounting Standards Board (FASB) and contemporary widespread accounting practices. To fully comprehend the obstacles facing Caltron Computers is remains necessary to define revenue recognition from a general perspective. Revenue is recognizable when future economic benefit will be directed to the company’s benefit and the benefits measured accurately (Emir, 2012). Each transaction will be identified and explained thoughout this memo to demonstrated the revenue recognition method employed by our organization. Caltron Computers recognizes revenue when the minicomputers are shipped. Recorded transactions are documented on financial statements when revenues are realized or realizable (Schroeder, Clark, & Cathy, 2011). The firm’s internal accounting department made the coherent decision to recognize revenue based on this principle. The first transaction consisted of a $400,000 of revenue on two product shipments to Elegant Housing, Inc. Contractual stipulations included a $20,000 payment to the firm upon shipment. Additional payments are contingent upon customer satisfaction or forfeiture if Elegant Housing, Inc., returns the systems. Revenue is recognized when indications of performance obligation and satisfaction exists within a particular product or service (Ohlson, Penman, Biondi, Bloomfield, Glover, Jamal, &Tsujiyama, 2011). Product satisfaction remained a influential variable for the firm to record this transaction as revenue. The second transaction involved a recorded...
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