Which of the following is not included in revenue account?

The objective of IAS 18 is to prescribe the accounting treatment for revenue arising from certain types of transactions and events.

Key definition

Revenue: the gross inflow of economic benefits (cash, receivables, other assets) arising from the ordinary operating activities of an entity (such as sales of goods, sales of services, interest, royalties, and dividends). [IAS 18.7]

Measurement of revenue

Revenue should be measured at the fair value of the consideration received or receivable. [IAS 18.9] An exchange for goods or services of a similar nature and value is not regarded as a transaction that generates revenue. However, exchanges for dissimilar items are regarded as generating revenue. [IAS 18.12]

If the inflow of cash or cash equivalents is deferred, the fair value of the consideration receivable is less than the nominal amount of cash and cash equivalents to be received, and discounting is appropriate. This would occur, for instance, if the seller is providing interest-free credit to the buyer or is charging a below-market rate of interest. Interest must be imputed based on market rates. [IAS 18.11]

Recognition of revenue

Recognition, as defined in the IASB Framework, means incorporating an item that meets the definition of revenue (above) in the income statement when it meets the following criteria:

• it is probable that any future economic benefit associated with the item of revenue will flow to the entity, and
• the amount of revenue can be measured with reliability

IAS 18 provides guidance for recognising the following specific categories of revenue:

Sale of goods

Revenue arising from the sale of goods should be recognised when all of the following criteria have been satisfied: [IAS 18.14]

• the seller has transferred to the buyer the significant risks and rewards of ownership
• the seller retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold
• the amount of revenue can be measured reliably
• it is probable that the economic benefits associated with the transaction will flow to the seller, and
• the costs incurred or to be incurred in respect of the transaction can be measured reliably

Rendering of services

For revenue arising from the rendering of services, provided that all of the following criteria are met, revenue should be recognised by reference to the stage of completion of the transaction at the balance sheet date (the percentage-of-completion method): [IAS 18.20]

• the amount of revenue can be measured reliably;
• it is probable that the economic benefits will flow to the seller;
• the stage of completion at the balance sheet date can be measured reliably; and
• the costs incurred, or to be incurred, in respect of the transaction can be measured reliably.

When the above criteria are not met, revenue arising from the rendering of services should be recognised only to the extent of the expenses recognised that are recoverable (a "cost-recovery approach". [IAS 18.26]

Interest, royalties, and dividends

For interest, royalties and dividends, provided that it is probable that the economic benefits will flow to the enterprise and the amount of revenue can be measured reliably, revenue should be recognised as follows: [IAS 18.29-30]

• interest: using the effective interest method as set out in IAS 39
• royalties: on an accruals basis in accordance with the substance of the relevant agreement
• dividends: when the shareholder's right to receive payment is established

Disclosure [IAS 18.35]

• accounting policy for recognising revenue
• amount of each of the following types of revenue:
  • sale of goods
  • rendering of services
  • interest
  • royalties
  • dividends
  • within each of the above categories, the amount of revenue from exchanges of goods or services

Implementation guidance

Appendix A to IAS 18 provides illustrative examples of how the above principles apply to certain transactions.

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Chapter 7:   Funds Analysis, Cash Flow Analysis, and Financial Planning

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1. According to the accounting profession, which of the following would be considered a cash-flow item from an "investing" activity?cash inflow from interest income.
cash inflow from dividend income.
cash outflow to acquire fixed assets.
all of the above.
2. According to the Financial Accounting Standards Board (FASB), which of the following is a cash flow from a "financing" activity?cash outflow to the government for taxes.
cash outflow to shareholders as dividends.
cash outflow to lenders as interest.
cash outflow to purchase bonds issued by another company.
3. If the following are balance sheet changes:
         $5,005 decrease in accounts receivable
         $7,000 decrease in cash
        $12,012 decrease in notes payable
        $10,001 increase in accounts payable
a "use" of funds would be the:$7,000 decrease in cash.
$5,005 decrease in accounts receivable.
$10,001 increase in accounts payable.
$12,012 decrease in notes payable.
4. On an accounting statement of cash flows an "increase(decrease) in cash and cash equivalents" appears asa cash flow from operating activities.
a cash flow from investing activities.
a cash flow from financing activities.
none of the above.
5. Uses of funds include a (an):decrease in cash.
increase in any liability.
increase in fixed assets.
tax refund.
6. Which of the following would be included in a cash budget?depreciation charges.
dividends.
goodwill.
patent amortization.
7. An examination of the sources and uses of funds statement is part of:a forecasting technique.
a funds flow analysis.
a ratio analysis.
calculations for preparing the balance sheet.
8. Which of the following is NOT a cash outflow for the firm?depreciation.
dividends.
interest payments.
taxes.
9. Which of the following would be considered a use of funds?a decrease in accounts receivable.
a decrease in cash.
an increase in account payable.
an increase in cash.
10. The cash flow statement in the United States is most likely to appear usinga "supplementary method."
a "direct method."
an "indirect method."
a "flow of funds method."
11. For a profitable firm, total sources of funds will always          total uses of funds.be equal to
be greater than
be less than
have no consistent relationship to

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What is included in revenue account?

What is not included in revenue receipts?