GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The use by others of enterprise resources yielding interest, royalties and dividends
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The rendering of services
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The sale of goods
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All of the above
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Detailed explanation-1: -As per the AS 9 Revenue Recognition issued by ICAI “Revenue is the gross inflow of cash, receivables or other consideration arising in the course of the ordinary activities of an enterprise from the sale of goods, rendering of services & from various other sources like interest, royalties & dividends”.
Detailed explanation-2: -Essentially, the revenue recognition principle means that companies’ revenues are recognized when the service or product is considered delivered to the customer-not when the cash is received. Determining what constitutes a transaction can require more time and analysis than one might expect.
Detailed explanation-3: -However, this accounting standard does not deal with revenues resulting from: construction contracts. hire purchase or lease agreements. government grants and other such subsidies.
Detailed explanation-4: -The revenue recognition principle states that revenue should be recognized and recorded when it is realized or realizable and when it is earned. In other words, companies shouldn’t wait until revenue is actually collected to record it in their books. Revenue should be recorded when the business has earned the revenue.