1. REVENUE RECOGNITION
AND
MEASUREMENT

2. Prof. Anjali K
1.Net increase in owners’ equity
from operation of the business
2.Revenue generated less expenses
and losses
INCOME

3. Prof. Anjali K
Methods of generating
Income
1.Sale of product or services to
customers
2. Supply of firm’s resources to other
firms to use
3. Sale of assets and/or Investments

4. Prof. Anjali K
REVENUE
Operating Revenue :
Revenue generated from the
operation of the business
Non operating Revenue :
Revenue from Incidental or
indirect to main activities of the
business

5. Prof. Anjali K
Receipts
 Capital receipts
Revenue Receipts

6. Prof. Anjali K
Revenue Recognition
1. At the point of sales :
Transfer of rights over the
goods by the seller to the buyer
for cash or cash equivalent
2. Providing service :
Recognizes as the service is
rendered

7. Prof. Anjali K
3. Construction Contracts
Less than ¼ of the work is completed:
No profit in the books of accounts
More than 1/4th but less than ½ of th
Work completed --
1/3 of the profit
More than ½ but less than 90%
- 2/3 of the profit
More than 90% is completed –
Estimate the profit as if the contract
is completed

8. Prof. Anjali K
4. Installment credit sales
If there is a reasonable certainty of
the receipts :
Revenue is recognized at
the time of delivery of goods
5. Production process
Products have immediate marketability:
Revenue may be recognized as soon as
production process is completed

9. Prof. Anjali K
6. Interest , Royalty and Dividend
a.Interest :-

10. Prof. Anjali K
6. Interest , Royalty and Dividend
a.Interest :-