Revenue Recognition – common methods used

costingIn a previous article we went into detail about what Revenue Recognition is and why it is necessary.

At a practical level what are the common methods of recognising revenue and how can this be achieved from an administrative perspective?

In the previous article mentioned above we stated that:

“Revenue is to be recognised over the period in which the services were performed. This is fairly straightforward for services provided on a Time and Material basis.”

“When a project involves delivery of a product that has required services to develop the product, e.g. software, and the provision of services to the project can be estimated reliably, revenue associated with the project shall be recognised by reference to the stage of completion of the project at the end of the reporting period.” read more

Revenue Recognition – Is it really necessary?

We have all heard of Sales, Billings and Revenue but how much consideration has been given to how and where these are reported and what they are used to managed.

sales alert menu iconA brick and mortar retailer of shoes knows precisely when they have earned revenue and how much. Recording the sale in the cash register is the sale event and the amount of money in the register determines the sale value. For this retailer the sale event is also the time at which income or revenue has been earned.

For a professional services organisation however it is not quite so simple. A scenario for a Fixed Price services project may go something like this:- read more