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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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When is revenue recognized?

To determine

Revenue recognition:

Revenue recognition is referred to the time of recognition of revenue by the business firms in the books for stating the respective revenue in the statement of profit and loss in the respective year and time.

The time of revenue recognition.

Answer

The revenue recognition is made in two ways i.e. one at receiving the cash and other at the point of sale only.

Explanation

The revenue recognition is made at two different times which depends on the method of accounting, a business is following. In the cash-accounting method, the revenue is recognised at the point of receiving the cash and on the other hand, in the accrual-accounting method, the revenue is recognised at the point of sale i.e. when performance obligation is satisfied.

Conclusion:

Thus, the revenue can be recognised in two ways which depend on its method of accounting.

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