Revenue Recognition and Expense Recognition

Revenue Recognition and Expense Recognition

Under the accrual basis accounting, revenues and expenses are recognized by the following principles:

Revenue recognition: Revenue is recognized when both of the following conditions are met: Revenue is earned and Revenue is realized or realizable.
Expense recognition: Expense is recognized in the period in which related revenue is recognized (this is also known as the Matching Principle).
Respond to the following in a minimum of 175 words:

Discuss when the requirements of the revenue recognition principle are usually met. Give an example.
Discuss when the requirements of the expense recognition principle are usually met. Give an example.

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Revenue Recognition and Expense Recognition

Revenue recognition in accounting is contained in the accrual principle which is very common and widely applied across different organizations. Under revenues recognition, the accounting standards stipulate that certain standards have to be met for revenues within the organization to be recognized and thereby consequently accounted for in the financial statements.

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