Question

The Revenue from Contracts with Customers standard adopts an asset-liability approach as the basis for revenue recognition.

1.explain how changes in assets and liabilities can measure revenue.

2.explain one of the steps in the five-step revenue process and give an example.

Answer 1

1. Like the accounting equation, it shows that a company's total amount ofassets equals the total amount ofliabilities plus owner's (or stockholders') equity.The incomestatement will explain part of thechange in the owner's or stockholders' equity during the time interval between two balance sheets.

2.The Five Step Approach to Revenue Recognition

Step 1: Identify the contract with the customer. ...
Step 2: Identify the performance obligations in the contract. ...
Step 3: Determine the transaction price. ...
Step 4: Allocate the transaction price to the performance obligations in the contract. ...
Step 5: Recognize revenue when, or as, the entity satisfies a performance obligation.