act 480 CT 3

Anonymous
timer Asked: Dec 24th, 2018
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Question description

Assignment Choice #1: The Case of the Airline Industry- When to Recognize Revenue

Consider the earnings process applying to a travel agent and an airline company and then defend the criteria for recognizing revenue in each of the two cases.

A travel agent helps a customer purchase an airline ticket and recognizes revenue for its commission at the point the customer purchases the ticket. Some argue that revenue recognition is appropriate because the earnings process of the travel agent—helping the customer make travel plans and arrangements—is largely completed once the customer purchases the ticket. What do you think?

In contrast, an airline that provides the same upfront service with its own in-house sales force cannot recognize revenue for these services because the airline’s earnings process is incomplete until the flight itself is provided.

Required: After reading the textbook chapter for this week on income concepts, discuss the factors to be considered in determining when revenue should be recognized in measuring the income of a business enterprise. Discuss the reasons why you believe that revenue recognition is treated differently under these two different scenarios with in the airline industry.

Your well-written paper must be 2-3 pages, in addition to title and reference pages. The paper should be formatted according to the CSU-Global Guide to Writing and APA Requirements (Links to an external site.)Links to an external site.. Cite at least two peer-reviewed sources, in addition to the required reading for the module.

Tutor Answer

Emilyprofessor
School: New York University

Attached.

Revenue Recognition

Revenue Recognition
Student’s Name
Professor’s Name
Course Code
Date

Revenue Recognition
Revenue involves an increase in the assets or a decrease in the liabilities or a combination of
these two situations which may result from provision of goods and services to potential
customers or just obtaining a contract to provide such goods and services (Moss, 2017).
Revenue recognition is a principle that is generally accepted. This principle is used to
determine specific conditions under which revenue can be accounted for after it has been
recognized (Shah, 2017). Revenue is usually recognized when the amount of revenue can be
measured and only after critical revenue events have taken place.
In the airline case where the travel agent recognizes the revenue by ass...

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