Question

In which sector of the economy would you expect revenue recognition to be a problem for accountants, and why?

Answer 1

Answer:

Issue of Revenue Recognition method is for Service Companies. The service sector is that one that is most affected by the differences between production and invoicing. Although the manufacturing of goods involves a more direct link, a more immediate and concrete correlation between production and invoicing, the service sector requires more complex financial managment. Some work phases resulting in the production of a service do not give rise to production that is immediate or directly quantifable. However it is advisable to integrate these phases into the calculation of the final revenue. Such is challenge of the choice of revenue recgnition method for a service company.