Small and medium enterprises are one of the major contributors to the Indian economy. They provide huge employment opportunities and account for nearly 95% of all industrial establishments in India. However they have to adhere to the accounting conventions, Generally Accepted Accounting Principles (GAAP) and Accounting Standards like any other company. This article looks into the special concerns especially on the revenue recognition by SMEs while adopting the accounting standards and Indian GAAP.

The Industries (Development and Regulation) Act, 1951, has set the boundaries or the limit for the "Small scale industries" and also originally articulated the policy for the Small Scale Industries (SSIs) in the policy platform. Now the Small and Medium Enterprises (SMEs), after lot of evolutions/versions have been made to match their nomenclature in title and in coverage. The SMEs accounted for about 66% of Employment, 93% of registered factories, almost 55% of the total value of the production and about 44% of the gross value added. The promotion of the Micro, Small and Medium Enterprises (MSMEs) has been set as a priority for the economy since independence.

Normally these small businesses have not more than 100 employees and medium business employ not more than 500 persons. Across all the countries, small businesses dominate the economy and contribute approximately 99% of businesses and about 40-50% of GDP. SMEs mainly focus primarily on manufacturing and less on servicing and concentration is on traditional industry—textile, engineering, jute, auto ancillary. A definition of a medium enterprise in terms of investment in plant and machinery in the category of Rs. 50 mn to Rs. 100 mn and also a proposal for the revision of the investment to the upper limit for a small scale enterprise has been proposed to Rs. 50 mn by the SMEs Bill, 2005 (SIDO, 2005).

The Accounting World Magazine, Accounting Recognition, Revenue Recognition, Generally Accepted Accounting Principles, GAAP, Accounting Standards, Small Scale Industries, SSIs, Small and Medium Enterprises, SMEs, GDP, Gross Domestic Product, Food and Drug Administration, FDA, Indian Economy, Confederation of Indian Industry, CII, World Assembly of Small and Medium Enterprises, WASME.