revenue recognition

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The process of recording revenue in the accounts of an organization in the appropriate accounting period. Revenue could be recognized at various points; for example, when an order is placed, on delivery of the goods, or on receipt of payment. It is essential to recognize revenue correctly to be able to calculate the appropriate amount of profit for a financial period. Normally, revenue is recognized when the buyer assumes the significant risks and rewards of ownership and the amount of revenue must be capable of reliable measurement. However, the complexity of some business transactions may make it difficult to determine in which financial period revenue should be recognized.

Subjects: Accounting.

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