Accrual revenue

We know the meaning of revenue: revenue is the gross inflow of economic benefits during the period arising in the course of the ordinary activities of the enterprise. According to the accrual, before being recognised and reported, revenue must be earned and realised, and it must be capable of being verifiably measeured.

Two conditions must be met before revenue can be recognised and reported in the income statement.

• The revenue must be earned, i.e. the activities undertaken to create the revenue must be substantially completed.
• The revenue must be realised, i.e. an event has occurred which significantly increases the likehood of conversion into cash. This also means that the revenue must be capable of being verifiably measured.

The date of the sale transaciton is the moment that the revenue is recognised in the financial statements.

Related posts:

1. Meaning of revenue
2. Measurement of revenue
3. Revenue disclosure
4. The distinction between capital and revenue expenditure?
5. Operating cash flow