Basically, by the rule, you should not recognize revenue until it has been earned. So, when is, exactly, a revenue considered as earned? You may ask. There are a number of rules regarding exactly when revenue can be recognized, but the key point is that revenue occurs at the point when substantially all services and deliveries related to the sale transaction have been completed.

If you’re around, in the accounting field, for long enough, you may find the term mentioned above is quiet broad.

I mean, you may find that, in certain circumstances, the rule seems to be unfits your specific situation. Through this post, I will overview various revenue recognition methods, all of which can be used under specific circumstances. You should be aware of which of the revenue recognition scenarios are most applicable to your situation, and report revenues accordingly. At the end of the post, I also will cover the revenue presentation. But before that, let’s have a look at the essential rules of the revenue recognition. Read on…