Basis and principle of revenue recognition
Recognition basis 1. 1 revenue-accrual basis
After the formation of modern enterprises, due to the separation of ownership and management rights, fiduciary responsibility has become a common concern of owners and operators, and has gradually become the goal of financial accounting. Accrual basis is derived from this economic environment.
From the perspective of double-entry bookkeeping, the increase of assets or the decrease of liabilities will be recognized at the same time as an income; When an expense is recognized, it will also recognize a decrease in assets or an increase in liabilities. Accrual basis actually involves the recognition of all accounting elements. But income is the most complicated factor in accounting, and the confirmation of income, especially when, may be one of the most complicated problems in financial accounting. The confirmation of income means that the right to receive income has occurred, and the confirmation of related expenses means that the responsibility for paying expenses has been determined. Therefore, accrual basis is mainly the recognition of income and expenses.
1.2 revenue recognition principle-substance is more important than form
In the Accounting Standards for Business Enterprises-Income (hereinafter referred to as Income Standards), the recognition and measurement of income from three types of transactions or events, namely, the sale of goods, the provision of labor services and the use of assets by others, are stipulated. At the same time, considering the particularity of construction contracts, non-monetary transactions, leasing, insurance contracts of insurance companies, futures, investment, debt restructuring and other transactions and matters, their confirmation principles are stipulated in their respective specific standards. From the content of each confirmation, it embodies the principle that substance is more important than form than before, that is, the condition of income confirmation is not the delivery of ownership certificate or physical form, but the transfer of main risks and rewards in commodity ownership.
How to confirm the income of 1.3?
In the income standard, income is defined as "the total inflow of economic benefits formed in daily activities such as selling goods, providing services and using enterprise assets, excluding the money collected for third parties or customers". From this definition, it can be decomposed into three important characteristics of income. First, the economic benefits of daily activities; Second, this kind of interest inflow is obtained by enterprises selling goods, providing services and letting others use their assets; Third, the inflow of economic benefits does not include the money received. In this way, accountants can confirm income from these three characteristics.
The recognition of income requires the professional judgment of accountants. When every income-related transaction or event occurs, it is necessary to identify whether the corresponding income items should be formally recorded in accounting, when they should be recorded and included in the statements, and whether the items recorded or included in the statements meet the four basic standards (definable, measurable, relevant and reliable). In addition, we should also consider whether the income matches its related costs and expenses, whether the income is greater than the cost, and whether the income items that should be recorded and included in the report conform to the principle of materiality.