Accounting Revenue Recognition Research Paper Example | Topics and Well Written Essays - 500 words

Accounting Revenue Recognition - Research Paper Example SolvGen Inc has agreed to three separate deliverables: a) The commercial launch of the first instrument system Version 1- Delivered March 31 b) The commercial launch of an improved instrument system Version 2- Pending development c) The commercial launch of new improved instrument system Version 3-Pending development. The other part of their agreement is the five year distribution and license contract with Careway Inc. Under this agreement Careway will have the right to market and distribute their proprietary instrument systems developed in conjunction with SolvGen. SolvGen is responsible for producing the necessary volume to meet the demand requirements of CareWay after each product launch. The company is responsible to maintain adequate inventory and production quality control to meet client requirements. 2) Based on the generally accepted accounting principles (GAAP) it is common practice to use the revenue recognition principle which states that any current revenue has to be reco gnized in the accounting period on which it is earned. Therefore a company cannot realize as current revenue any payments that are part of a long term contract; these payments should be differed and systematically recognized over the remaining time of the agreement or contract.