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Question 2

When should revenue be recognised? Are there exceptions to the general rule?


Revenue should be recognised when sales take place either in cash or credit and/or right to receive income from any source is established. Similarly, rent for the month of March even if received in April month will be treated as revenue of the financial year ending 31st March.

There are two exceptions of this rule:

a) In case of sales on installment basis, only the amount collected in installments is treated as revenue.
b) In case of long term construction contracts, proportionate amount of revenue, based on part of the contract completed by the end of the financial year is treated as realised.

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