According to the concept of revenue recognition, revenue is to be recognized only when rewards and benefits are associated with the items sold and services provided are transferred i.e. when the right to receive money is established. In other words, at the point where the seller has completed his part of the transaction. It is to be noted that receipt of revenue and receipt of an amount are two distinct aspects.
Revenue Recognition Concept Examples
When Vodafone sells you the talk time through scratch cards, it does not recognize the revenue when the scratch card is sold, but it is recognized when the subscriber makes a call and consumes talk time.
India Today Receives an annual subscription of Rs 240 from Mr. X during the beginning of the year but it recognizes revenue worth Rs 20 (i.e. Rs 240/12) each month.
Star Sports recognizes the revenue when the advertisement is actually aired. That is, it does not matter whether the payment is received in advance or after the broadcast of the advertisement
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