Ethical Obligations and Decision-Making in Accounting 2nd Edition by Steven Mintz, Roselyn Morris

Exercise 11

Why do you think it is important to separate out the selling prices of each element of a bundled transaction? How might the separation affect recorded revenue in the period of sale and in future periods?

Step 1 of 2

Revenue:

Revenue is the total income earned by the business before the deduction of expense in its normal course of activity by performing the service or selling goods.

Example: Amount received from the sale of goods and services, rent received, commission.

It is added to the capital. It is an inflow of assets and increases the wealth of the organization, that result increases the owners’ equity.