What Is Realization Principle?


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d ds Profile
d ds answered
In accounting, the realization principle refers to the way revenue is to be recognized. The principle says that “revenue is to be recognized when the services have been rendered and the goods have been sold”. This means that no sale is recognized when a customer makes an advance payment. Till the time, the services are actually rendered; it is recorded as a credit entry to ‘unearned revenue’ account. When the revenue is earned, the “unearned revenue account” is debited while the revenue account is credited by the same amount.

An example is that when people buy tickets for a baseball match in advance, the case received is not recorded as revenue; it is credited to the unearned revenue account. On the day of the game, when the promised service has been delivered in the form of the match, the revenue is recognized.
mazhar solangi Profile
mazhar solangi answered
Realization and matching principle are accrual basis accounting principles .
Realization principle states that when goods supplied or services given to customer so it is considered that revenue is earned either cash is collected or not .
Matching principle states that when service are received or goods are consumed than expenses are recored in account.
For e.g if an organization has purchased Rs12000 office supplies on sept 1 and supplies expired Rs4000 on DEC 31 and remained on hand is Rs8000 so  Rs4000  is recored as expense to match expenses  for the  period.

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