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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Accounting Principles
According to The American Institute of Certified Public Accountants “Principles of Accounting are the overall law or rule adopted or proposed as a guide to action, a settled ground or basis of conduct or practice”
Basic Accounting Terms
After going through this lesson, you will be ready to understand the ‘Basic Accounting Terms’ that we commonly use in Accountancy.
3 Fundamental Accounting Assumptions
After browsing this lesson, you shall be ready to understand the subsequent Fundamental Accounting Assumptions: Going Concern, Consistency, Accrual