What is meant by Revenue Recognization

[Former Member]

Hi Gurus,

Please through some light on Revenue Recognization, in which scenario and business process exactly we use this concept?

Thanks in advance.

Venkat

[ajitsingh6 · Accepted solution]

Dear,

An accounting principle under generally accepted accounting principles (GAAP) that determines the specific conditions under which income becomes realized as revenue. Generally, revenue is recognized only when a specific critical event has occurred and the amount of revenue is measurable.

For most businesses, income is recognized as revenue whenever the company delivers or performs its product or service and receives payment for it. However, there are several situations in which exceptions may apply. For example, if a company's business has a very high rate of product returns, revenue should only be recognized after the return period expires.

Companies can sometimes play around with revenue recognition to make their financial figures look better. For example, if XYZ Corp. wants to hide the fact that it is having a bad year in sales, it may choose to recognize income that has not yet been collected as revenue in order to boost its sales revenue for the year.

Regards

AJIT K SINGH

[ivano_raimondi]

Hi Venkat,

please check the document attached to note 1172799. It explains everything around revenue recognition.

Best regards,

Ivano.

[RBM]

This means an estimated revenue at the time of goods issue. That is to say it estimates the revenue even before you have created an invoice.

The escenario, for example: Companies which have shipments that run over a long period of time use this function.

Hope this help.

Regards!