Caltron Computers

The primary objective of this memo supports the company’s position to record four specific transactiosn questioned by an external auditing firm, Peal, Gower, and Quill. Caltron Computers operates with the upmost integrity in a financial accounting and operational basis. Creative accounting methods can inaccurately present an organization’s financial income (Laura, Dumitru, & Razvan, 2011). Our firm relies solely on revenue recognition accounting principles defined by the Financial Accounting Standards Board (FASB) and contemporary widespread accounting practices. To fully comprehend the obstacles facing Caltron Computers is remains necessary to define revenue recognition from a general perspective. Revenue is recognizable when future economic benefit will be directed to the company’s benefit and the benefits measured accurately (Emir, 2012).

Each transaction will be identified and explained thoughout this memo to demonstrated the revenue recognition method employed by our organization. Caltron Computers recognizes revenue when the minicomputers are shipped. Recorded transactions are documented on financial statements when revenues are realized or realizable (Schroeder, Clark, & Cathy, 2011). The firm’s internal accounting department made the coherent decision to recognize revenue based on this principle. The first transaction consisted of a $400,000 of revenue on two product shipments to Elegant Housing, Inc. Contractual stipulations included a $20,000 payment to the firm upon shipment.

Additional payments are contingent upon customer satisfaction or forfeiture if Elegant Housing, Inc., returns the systems. Revenue is recognized when indications of performance obligation and satisfaction exists within a particular product or service (Ohlson, Penman, Biondi, Bloomfield, Glover, Jamal, &Tsujiyama, 2011). Product satisfaction remained a influential variable for the firm to record this transaction as revenue. The second transaction involved a recorded transaction in the amount of $250,000 from Alation Electronics, Inc. The electronic company paid our firm $250,000 and placed a hold on the shipment until the first quarter of 2012.

The familiar earnings model indicates that revenue is recognized and reportable when payment has been received from a customer for the goods and services promised have been provided (Ryerson, 2010). Wide-spread contemporary accounting research reinforces this notion that remains indicative of the firms decision to record this transaction. The mutual relationship of goods and services provided plays key role in revenue recognition. The firm only makes revenue recognizable once payment has been generated and received.

Major changes proposed to GAAP for revenue recognition. Full Text Available By: Ryerson III, Frank E. Journal of Finance & Accountancy. Dec2010, Vol. 5, p1-9. 9p.

Accounting for Revenues: A Framework for Standard Setting. Full Text Available By: Ohlson, James A.; Penman, Stephen H.; Biondi, Yuri; Bloomfield, Robert J.; Glover, Jonathan C.; Jamal, Karim; Tsujiyama, Eiko. Accounting Horizons. Sep2011, Vol. 25 Issue 3, p577-592. 16p. 1 Chart. DOI: 10.2308/acch-50027.

. CASH FLOW REPORTING AND CREATIVE ACCOUNTING. Full Text Available By: Laura, Negrea; Dumitru, Matiş; Razvan, Mustaţă V. Annals of the University of Oradea, Economic Science Series. 2011, Vol. 20 Issue 2, p597-602. 6p. 1 Chart.

Revenue Recognition. Full Text Available Gelir Tahakkuku. By: Emır, Murat. Journal of Graduate School of Social Sciences. Jun2012, Vol. 16 Issue 1, p467-476. 10p.