accounting system , Revenue Recognition Principle

  
Revenue Recognition Principle

The main problems in accounting for revenue is determining when revenue recognition. On the principle of recognition of revenue (revenue recognation principle), revenue is generally recognized when (1) realized or realizable and (2) is generated (earned). The purpose of this statement is that:

    Revenue is considered realized when goods and services, merchandise, or other assets exchanged for cash or claims to cash; Revenue is considered realizable when assets received in exchange for the conversion immediately (ready to be exchanged) into cash or claims to cash with a known quantity;
    Considered income generated (earned) if the relevant entity is essentially finished what should be done to get the right to benefits held by income, ie, if the process of generating real profits have been completed or has been completed.



Four transaction revenue has been recognized in accordance with the above principles, namely:

    Revenue from product sales is recognized at the date of sale, usually interpreted as the date of delivery to the customer.
    Revenue from rendering of services is recognized when services are recognized when the services are implemented and can be billed.
    Revenues from allowing others to use enterprise assets such as interest, rents and royalties is recognized in accordance with the implementation of time or when the asset is used.
    Income from disposal of assets other than products is recognized at the date of sale.


Measurement revenues by Indonesian Institute of Accountants (IAI) is measured by the fair value of the consideration received or receivable.

According to Statement of Financial Accounting Standards (SFAS) No.. 23 on earnings stating that the income arising from economic events, the following: (1) Sales of goods, (2) Sales of services, (3) Use of corporate assets by other parties that generate interest, royalties, and dividends.

Revenue from sale of goods shall be recognized when:

    The Company has transferred significant risks and rewards of ownership have transferred the goods to the buyer;
    Companies no longer manage nor effective control over the goods sold;
    The amount of revenue can be measured reliably;
    It is probable that the economic benefits associated with the transaction will flow to the company, and
    Costs incurred and will be incurred in connection with the transaction can be measured reliably.


Revenue related to the sale transaction services that can be estimated reliably (free from the notion is misleading, material error, and its use as a reliable and honest tuluis usage of which should be presented or that may reasonably be expected to served) should be recognized by reference to the level completion of the transaction at the balance sheet date.

A transaction can be estimated reliably when:

    It is probable that the economic benefits associated with the transaction will flow to the company;
    Stage of completion of a transaction from the balance sheet date can be measured reliably;
    The amount of revenue can be measured reliably;
    Costs incurred for the transaction and the costs for the completion of the transaction can be measured reliably.


When transactions include the sale of services can not be estimated reliably, revenue is recognized only concerned with the burden that has been recognized that are recoverable.

Revenue arising from the use of corporate assets by other parties that generate interest, royalties and dividends shall be recognized on the basis of:

    Interest shall be recognized on the basis of the proportion of time that takes into account the results of effective asset;
    Royalties should be recognized on an accrual basis in accordance with the substance of the relevant agreement, and
    In the cost method (cost method), cash dividends are recognized when the shareholders' rights to receive payment is established.


Recognition on the basis of the performed when:
 (1) probable economic benefits associated with the transaction will flow to the company, and
 (2) the amount of revenue can be measured reliably.

But if uncertainty arises about the collectibility of an amount already included in revenue, the amount of which can not be billed, or the amount of recovery or return is no longer probable, is recognized sebgai load, the adjustment of the amount of revenue originally recognized.

All of the above extract conceptual nature of the income and the basis of accounting for revenue transactions. In the revenue recognition practices, sometimes recognized as other income in the process of making a profit, that is mainly caused by (1) wish to acknowledge earlier (Earlier recognize) if there is a high degree of certainty about the amount of revenue generated, and (2) willingness to defer recognition of revenue if the level of uncertainty about the amount of revenue or expense is high, or Jiak penjulan not constitute substantial completion of the process of making a profit.