The
American Institute of Certified Public Accountants (AICPA)
has defined revenue in the following words. Revenue results
from the sale of goods and the rendering of services and is
measured by the charge made to customers, clients or tenants
of goods and services furnished to them. It also includes
gains from the sale or exchange of assets other than stock
in trade; interest and dividends earned on investments and
other increase in owner's equity except those arising from
capital contributions and capital adjustments. Revenue from
ordinary sales or from other transactions is sometimes described
as operating revenue.
Revenue
is the income resulting from the sale of goods and the rendering
of services to the customers in the ordinary course of business.
For the purpose of preparing the annual financial statements,
business entities have to recognize revenue. Revenue recognition
is the process of identifying the items of revenue receipts,
which are to be considered for the matching of costs and revenue.
Under the accrual system of accounting, revenue is recognized
at the time of sale or rendering services whether cash is
received or not. Provided that at the time of performance,
it is not unreasonable to expect ultimate collection.
Where there is a contract for the sale of specific or ascertained
goods, the property in them is transferred to the buyer at
such a time as the parties to the contract intend it to be
transferred.Where there is an unconditional contract for the sale
of specific goods in a deliverable state, the property in
the goods passes to the buyer when the contract is made, and
it is immaterial whether the time of payment of the price
or the time of delivery of the goods, or both, is postponed.
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