FASB Revenue Recognition Essay Example | Topics and Well Written Essays - 500 words

FASB Revenue Recognition - Essay characterccounted principles (GAAP) establish the standards, rules and procedures which accountants must follow when realizing bookkeeping and accounting officiate. The GAAP framework is developed through a series of assumptions, principles and constraints. Two important principles Legal Plan Services should keep in mind be revenue credit rating principle and the matching principle for expenses. The revenue recognition principle stipulates that revenues should be accept when the work is realizable and earned. Receiving cash does not imply the business has performed the work. Expenses are recognized not when the work is performed, or when the product is produced, but when the work or product actually makes its contribution to revenue (Wikipedia). governing expenses do not follow the matching principles since they are not directly linked to the creation of particular(prenominal) revenue, they are considered period costs.The best way for Legal Pla n Services to present a publish that clearly presents the amount of revenues and expenses in a reliable, comparable and consistent manner is through the financial contention called income statement. The income statement is divided into two parts within the report. At the top of the report revenues are illustrated, period the bottom part gives the user information about the expenses the community incurred. In the income statement the company should embarrass notes to the statement to explain the practices utilized for creating revenues and recognizing expenses.The company has serious flaws in both its revenue and expense recognition methodology. The company is collecting money from customers for a service they will provide in the near future. This resultant behaves like unearned revenue. Unearned revenue is sometimes referred to as deferred revenue (Weygandt & Kieso & Kimmel, 97). In the ledger of the company the journal entry would be a debit to cash and a credit to unearned r evenue. At the time the company provides the service the journal entry