Revenue recognition-matching principle

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Reference no: EM13954173

Revenue Recognition

Explain whether a company must have an inflow of an asset to be able to recognize revenue. Also, give two examples of situations in which revenue is earned continuously over a period of time.

Matching Principle

Assume that a company purchases merchandise for resale on December 20, 2014. The merchan- dise is still on hand on December 31, the company's year-end. On January 12, 2015, the mer- chandise is sold to a customer. Explain how the merchandise will be treated on any of the financial statements at year-end. In which year will revenue from the sale be recorded? In which year will cost of goods sold expense be recorded?

Reference no: EM13954173

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