Revenue Recognization

[anjan123]

Hi,

Could any body give me a good example for revenue recognization.

if you give me case study it will really helpful.


Regards
Anjan

[SIVAKUMAR_G]

Hi

A Good example for revenue recognition is sale of Goods on Hire Purchase basis. This is for Invoicing in Advance

If you are a dealer in say two wheeler or Four wheeler vehicles and you sell the goods on 12 Installements, you do not want to recognize all revenue now itself when you book the Invoice and spread it across over the Installment period

In this case it will be

First entry as on 01-JAN-2007

Receivales A/c Dr 12000
Unearned Revenue A/c Cr 12000

31-Jan 2007

Unearned Revenue A/c Dr 1000
Revenue A/c Cr 1000

28-Feb-2007

Unearned revenue A/c Dr 1000
Revenue A/c Cr 1000

till Dec 2007

A Good Example for Invoicing in arrears is say you are holding a big multi storeyed apartments and you need to collect service charges from all tenants of 1200 USD per annum and you want to recognize the revenue immediately but book the Receivables in arrares to the tenants. then

On 01-JAN-2007

Unbilled Receivables A/c Dr 1200
Revenue A/c Cr 1000

31-Jan-2007

Receivables A/c Dr 100
Unbilled Receivables A/c Cr 100

28-Feb-2007

Receivables A/c Dr 100
Unbilled Receivables A/c Cr 100

till Dec 2007

Hope this helps

Regards
Sivakumar

[raviteja.manchu]

Hi,

The above ex is good example for the use of revenue recognisition.When ever you are enterting an transaction with rules like accounting and invoicing rules.Based on that rules you will run this revenue recognisition program.

Regards,
Ravi Manchu

[muskan]

good example but ur second exapmle and what i have understood from invoice in arrears that we will receive all amount at a time and will recognise it to the period it belongs to rest will remain uneerned plz rectify if i am wrong