Question

In revenue recognition these criteria:

-at the sale of product

-realization of revenue

Both of these criteria must be met

When and in what event the two criteria are met?

Answer 1

Ans: There are two criteria of Revenu Recognition under GAAP i.e Sale of product or rendering of services and realization of such sale or service revenue. Both the criteria must be met before recognizing revenue in the books of account of enterprises. When all the following criteria are met then the realization of revenue is recognized :

1- There is persuasive evidence that an agreement exists.

2- Delivery has occurred or services have been rendered.

3- The Seller's price to the buyer is fixed or determinable and

4- Collectibility is reasonably assured.