... arises from the difficulty in developing guidelines applicable to all situations. Recognition principle of revenue is recognized when it is realized at the time of sale of merchandise in the retail business or at the time of rendering the service if it's a service business. During realization the earnings process is complete because the transactions is consummated, and selling price is determinable, cost of sale is known. You can also determine revenue recognition during sales transactions at the point of sales; an example is cash sales versus credit sales. There's also a revenue recognition method, which is the percentage of completion. This method recognizes profit on a long-term construction contract as it is earned gradually during the construction period. Under this method, the measure of revenue to be recognized each year is equal to percentage completed times the contract price. Any revenue that had been recognized in a prior period ...

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