Revenue Recognition Principle
The realization concept is important for determining the revenues during the accounting period.
Revenue is the income earned by providing Services/selling of products. E.g. Commission, Sales receipt etc.,
In case of Sale of goods- Revenue is recognized only on the date of passing of title of goods . It does not include on the date of placing of order etc.,
In case of Works contract: The revenue is recognized on the basis of cash received on partially completed remaining is treated as sale.
In case of Rent /Interest on loan paid: On the basis of the Passage of time
In case of Royalty: on the basis of Production /sale of products.
Prepaid, Income received in advances are to be ignored for the purpose of Revenue Recognitions.