Revenue is generally recognized being earned at the point of time when

The correct answer is - Goods are delivered

Key Points

• Revenue Recognition Principle
  • Revenue is recognized when it is earned and realizable.
  • This typically occurs when goods are delivered to the customer, and the risks and rewards of ownership are transferred.
• Delivery of Goods
  • Delivery signifies the point at which the control of the goods passes to the buyer.
  • It meets the criteria of both earning and realization as defined by accounting standards.

Additional Information

• Order is received
  • Receiving an order does not constitute earning revenue as the goods have not yet been delivered or services performed.
  • It merely indicates a commitment to supply goods or services in the future.
• Production is completed
  • Completion of production does not mean revenue is earned, as the goods still need to be delivered to the customer.
  • Ownership and risk have not been transferred at this stage.
• Cash is received
  • Receiving cash could be an advance payment or payment after delivery; the key is the delivery of goods or services for revenue recognition.
  • Accounting standards require that revenue is recognized when earned, not necessarily when cash is received.