Question

Briefly explain about revenue recognition concept.

Answer 1

1)The revenue recognition principle states that revenue should be recognized and recorded when it is realized or realizable and when it is earned.

2)Revenue should be recorded when the business has earned the revenue. This is a key concept in the accrual basis of accounting because revenue can be recorded without actually being received

3)There are three main exceptions to the revenue recognition principle

*Some manufacturers may recognize revenue during the production process.  The revenue in these cases is considered earned at various stages of job completion.

*companies recognize revenue after the manufacturing process but before the sale actually takes place. Mining, oil, and agricultural companies use this system because the goods are marketable and effectively sold as soon as they are mined

*last exception to the revenue recognition principle is companies that recognize revenue when the cash is actually received.


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Answer 2

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$\: \: \: \: \: \: \: \: \: \: \: \: \: \: \texttt{The Revenue Recognition concept helps in } \\ \texttt{ascertaining the amount and time of recognition } \\ \texttt{the revenues from the ordinary business } \\ \texttt{activities. In simple words, revenue recognition } \\ \texttt{concept tells us the procedure of determining } \\ \texttt{the income and expense for incorporation in } \\ \texttt{profit and loss account.}$

$\: \: \: \: \: \: \texttt{ \blue{The Revenue Recognition Principle is also known }} \\ \texttt{ \blue{as Revenue Realisation Principle. Accouting}} \\ \texttt{ \blue{Standard 9 deals with the basis for recognition} } \\ \texttt{ \blue{of revenue arising from ordinary activities of an }} \\ \texttt{ \blue{enterprise in the profit and loss account.}}$