Question

What do we have in common or not?---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

During production - If revenue is recognized during production than the prudence concept of accounting is not followed that is to provide for future losses but not for future incomes. The risk is during production it is not certain that whether goods shall be sold in current period or not so correct revenue recognition shall not be possible. As per accrual basis transaction is not been incurred and revenue must not  be recognized.

Production complete -

If revenue is recognized when production is complete than the prudence concept of accounting is not followed that is provide for future losses but not for future incomes. The risk is that it is not certain that whether goods shall be sold in current period or not so correct revenue recognition shall not be possible. As per accrual basis transaction has not been incurred and revenue must not be recognized.

Receiving order from customer - This is also not a correct stage to recognize sale, receiving order do not guarantee that sales will in current accounting period or order might get cancelled too thus it is not good basis to recognize sales. As per accrual basis transaction has not been incurred and revenue must not be recognized.

Point of sales - This is correct stage to recognize sales as per accrual basis transaction has bees incurred and revenue must be recognized.

Cash collections - Cash collection does not guarantee recognition of sales as cash can be collected in different accounting period other than period in which transaction is incurred. Thus it has risk of not recognizing revenue in proper accounting period.

What do we have in common?-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

My role in Professional Services for a SAAS company.  

Before Service Delivery				At Service Delivery	After Service Delivery
Before Scoping of Service Delivery	During Scoping of Service Delivery	Scoping of Service Delivery Complete	Receive Customers’ Order for Scoped Services	Point of Sale	Cash Collection
Risk: Items 1-4 do not exist. At this point, our pre-sale team has just been engaged that a prospect has expressed interest in our services. No expectations of us delivering the work or getting paid exists.	Risk: Items 1-4 do not exist. At this point, we engage the prospect to understand their needs. No expectations of us delivering the work or getting paid exists.	Risk: Items 1-4 do not exist. At this point, we understand the prospect's need and have scoped the work and quoted a price. There is still no expectations of us delivering the work or getting paid to do the work. Nothing outside a generated quote exists.	Items 1 -4 exists, with item 4 being a risk. We have received a signed quote from the customer and must countersign the legal document. A risk now is there is a contract issue. Perhaps the prospect has relined something in our contract that we don't agree with.	Items 1 - 4 exist, with item 4 being a risk Risk: Once we have countersigned the contract, we can begin delivering services. Risks at this point include meeting acceptable customer timelines and delivering acceptable work and ensuring that item 4 is met in that the customer has the cash to pay us on our net 30 terms.	Item 1 -4 exist; with item 4 being a risk. however, we can only recognize revenue as we do the work. For example. If we scoped a project for 10 hours at 100/hour, the sale is $1000. If we completed 2 hours of work this month, we can only recognize $200 of revenue. We can not recognize the revenue until we complete the work.

Answer 1

red also explainedco