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Revenues are recognized in the accounting period when the sale is made and expenses are recognized in the period in which they relate to the sale of the product. Revenues are recognized when cash is received and expenses are recognized when cash is paid. Revenues and expenses are recognized based on the choices of management. Revenues and expenses are recognized equally over a twelve month period.
Accrual Basis Of Accounting
The accounting method under which revenues are recognized on the income statement when they are earned (rather than when the cash is received). The balance sheet is also affected at the time of the revenues by either an increase in Cash (if the service or sale was for cash), an increase in Accounts Receivable (if the service was performed on credit), or a decrease in Unearned Revenues (if the service was performed after the customer had paid in advance for the service).
Under the accrual basis of accounting, expenses are matched with revenues on the income statement when the expenses expire or title has transferred to the buyer, rather than at the time when expenses are paid. The balance sheet is also affected at the time of the expense by a decrease in Cash (if the expense was paid at the time the expense was incurred), an increase in Accounts Payable (if the expense will be paid in the future), or a decrease in Prepaid Expenses (if the expense was paid in advance).
The revenue is recognized before cash is received. Under the accrual basis the Revenues are recognized when both of the following conditions are met:
1. The revenue is earned.
2. The revenue is realized or relizable. The realized means that that the cash is receivabed and realizable means that the cash is expected to be received in the future.
The expense is recognized in the period when the related revenue is recognized. The expense is recognized before cash is paid.
The difference between accrual and cash basis accounting is the date of when revenue and expenses are inccured.
The cash method is most used by small companies.
The cash method accounts for revenue only when the money is received by cashier
and for expenses only when the money is paid out.
BUT :the accrual method accounts for revenue when it is earned and expenses goods and services when they are incurred.
The revenue is recorded even if cash has not been recieved or if expenses have not been paid.
Accrual accounting is the most common method used by businesses.
revenue recogition is made upon reveived purchase order or contract signed and delivery of goods made to customer in the period . either the invoice is issued or not.
Expenses are recognized upon invoice of vendor together with our purchase order or signed contract. the goods or services must be certified received in the period in question.
I think Revenues are recognized in the accounting period when the sale is made and expenses are recognized in the period in which they relate to the sale of the product.
Under the accrual basis of accounting, revenues are recognized when earned and expenses are recognized when incurred. For revenues, it is considered earned if the services are already rendered or if the ownership over the goods are transferred. Ownership do not always follow the location of the goods. But basically, the holder of the goods is the owner unless otherwise there are other circumstances contradicting the same.
Service/product rendered/sold recognized, revenue recognized. service/material received/purchased recognised as expenses.
Under the accrual basis of accounting revenue is recognized when earned and expenses are recognized when incurred regardless of weather the cash is received or paid.
Agree with Rehan Qureshi.
ACCRUAL BASIS ACCOUNTING:
REVENUES are recognized when EARNED
EXPENSES are recorded when OCCURRED
Revenues are recognized when it actually sold or executed. And expenses are recognized during the current year pertaining to the relevant revenues.
