Concept of Revenue Recognition

In simple words revenue recognition states that the revenue must be recorded when it is earned or realized. It can also be put as a firm must not delay till the revenue is practically acquired to record. Revenue must be accounted once the firm has earned it. This is the main concept in accounting due to the fact that revenue can be accounted without acquiring.

When are revenues realized?

It is once a firm sells the services or goods for any asset or cash. For example, if a business gives to a customer an inventory, it’s called realizable revenue. This deal leads to a particular value of cash. Once the revenue is earned, it is recorded. For the above example, once the ownership of the inventory is bore by the customer then only revenue is acquired.

Following are three key exceptions to the principle:

  • Some businesses have to collect the revenue before the work even completes example defence work or construction work. In such cases, the revenue is collected several times at different stages of completion.
  • Some businesses are of the nature which has to realize the revenue once the production is finished but the sale hasn’t taken place yet. Example, agricultural companies, oil, mining due to their products being marketed and sold immediately.
  • This exception is when the revenue is realized only when the cash is actually received by the firm. This concept is called cash basis accounting. Example: instalment sales.

Why Obama’s Definition Of Economic Fairness Is Fundamentally Wrong

During the state of the Union address, President Obama once again made his case for economic ‘fairness’ to argue for more taxes and a larger government.

Obama believes that fairness cannot be achieved by the private sector of the economy, because people and nations are not fair to each other and they will never be without government policy to level the playing field.

Obama said it this way,

We can either settle for a country where a shrinking number of people do really well, while a growing number of Americans barely get by.  Or we can restore an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules.”

The only solution that Obama can see is for the government to step in and change the rules that are causing unfairness that result it economic inequality.  Part of this is correct and I’m glad that Obama realizes the source of the unfairness – government policy.

But the part that he does not seem to realize is that no amount of government policy has ever been able to level the playing field.  And that is because it is impossible for government to make economic policies that are ‘fair’ and without competitive advantages and disadvantage for someone.  The only thing that government policies can do is change which businesses/nations get the competitive advantages and disadvantages.

All Obama can do is take unfair policies away from some companies and create new unfair policies for other companies.  The only question is which companies are politically connected to Obama, so they can get the new policies that create unfair advantages for them.   But this kind of politically determined ‘fairness’ is not fair at all.  In fact, all he is saying is that his influence is for sale to the highest bidding lobbyist.

Obama is saying that the economy is distorted because the government is corrupt with crony capitalism and he is going to fix it with his own crony capitalism. This is exactly what he is doing with his green energy programs, his support for public education to limit school choices and Obamacare crowding out healthcare alternative competitors.  He is giving the lobbyist and companies that support him politically the competitive advantages by giving them easy government loans, tax subsidies, price controls and direct handouts.

10 Reasons Why the Economic Stimulus Package was a Complete Failure

In the beginning of the year Obama told us that if we dont pass his economic stimulus package that unemployment could reach 8 percent.

Lately, unemployment was 10.2 percent and is expected to keep inclining through next year.

The Stimulus Package Failure

The stimulus package was a failure in so many ways, here are my top ten reasons;

  • It failed in reviving the economy.
  • It failed to protect the value of the dollar which foreign nations are now threatening to replace.
  • It failed to halt the housing bubble, which will bust again after the fed stops buying mortgages.
  • It failed to stop a stock market bubble from Building up, which is getting ready to bust.
  • It failed to give any real jobs.

I hope the top leaderships stops thinking on its feet and comes out with the concrete decisions which will really help in the United states economy to prosper.And if they don’t the US economy could fall down like a pack of cards.