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REALISATION CONCEPT | CAIIB NOV EXAM 2022

CAIIB NOV SHORT NOTES 2022

This article discusses all aspects of the Realisation-concept and CAIIB Nov exam study material 2022.

CAIIB Nov exam 2022 is to be conducted by IIBF on November 27, December 4, and December 10. All the candidates who wish to appear in the CAIIB exam Nov 2022 need to gear up and prepare for the CAIIB exam Nov 2022. But you don’t have to worry about your preparation as we are here to help you with our carefully compiled CAIIB Nov study material 2022, which includes video lectures, short notes, and CAIIB mock tests 2022.

This CAIIB study material 2022 is discussed later in this article. First, we will discuss one of the essential topics for the CAIIB exam Nov 2022 i.e. Realisation-concept.

REALISATION CONCEPT 

A revenue recognition principle known as the realisation Principle states that income or revenue is only recognised when earned. The business is reasonably assured that the customer will make the required payment. Regardless of whether the money is received, it often happens when the underlying commodities are provided, risk and rewards are transferred, or income becomes due.

The realisation concept relates to revenue recognition and states that when goods are transferred, or risks and rewards are transferred, profit should also be realised. Revenue is recognised when it is due in the case of income. Revenue or income must be recognised using the percentage completion approach for a continuing service business, such as the real estate industry.

This idea states that revenue should only be recognised after it has been earned or when it is conceivably certain that the company will be paid by its client. When risk and rewards are transferred or when income is due, this revenue is realised. The realisation principle does not depend on receiving money; hence, income or revenue must be recognised even if money is not received. For instance, if the advance is paid, but the items are not transferred, income cannot be recognised. Only when the products are delivered is it to be acknowledged.

Read Also: FREE MOCK TEST ON RETAIL PRODUCTS

IMPORTANCE OF REALISATION CONCEPT

  • As profit is only to be realised and reported when the seller transfers risk and rewards, it ensures an accurate and fair view of the accounts.
  • The realisation principle can help to reduce risk.
  • Instead of focusing on revenue collection, true revenue earned throughout the year is given prominence and acknowledgment.
  • Consistent recognition is ensured.
  • The method can be used to recognise revenue in the situation of continuous services with a percentage of completion. Therefore, depending on the type of revenue, it offers a solution for all forms of revenue recognition.
  • It emphasises legitimate ownership, which is recognised and enforceable by law.

ADVANTAGES OF REALISATION CONCEPT 

  • The recognition of revenue is given more weight by the realisation idea.
  • In accordance with the accrual system of accounting, it is frequently used in corporate organisations.
  • It directs the accounting procedure and revenue recognition.
  • The inflation of income and profits can be managed using realisation principles.
  • The realisation notion more accurately captures the actual and fair viewpoint.

EXAMPLES OF REALISATION CONCEPT 

    1. I received Rs. 20,000 on March 23, 2022, as payment in advance for the Rs. 30,000 worth of goods were sold on April 2, 2022. Deliveries start on April 5, 2022. According to the realisation principle, when is revenue considered to have been realised?
      • The risk and rewards associated with an underlying asset are said to be transferred when the goods are delivered or when the seller accepts responsibility for the goods in the event of damage or destruction at the buyer’s location. This is in accordance with the Realization Principle.
      • The goods were delivered in the afore-mentioned situation on April 5, 2022. So, it is stated that the revenue will be realised on April 5, 2022. Therefore, sales should be reported on April 5, 2022, rather than March 23, 2022. The receipt of the money is not a concern of the realisation principle.
    2. Trucks are sold by ABC Ltd. to its sole dealer, who signs a contract for delivery to the customer and maintenance for a year. Describe the recognition principle’s requirements for how revenue should be recorded.
      • According to the Recognition Principle, when all the risks and benefits associated with the underlying asset have been transferred in the case of goods, revenue must be recognised.

In the aforementioned instance, the sale of the truck is connected to the sale of products, and the maintenance contract refers to the ongoing service that will be offered to the client for a year. The revenue for trucks is, therefore, to be recognized in accordance with the recognition principle when the risk and rewards associated with the truck are transferred, or the truck is delivered, whichever occurs first.

In the case of a maintenance contract, revenue must be recognised on a percentage completion basis, meaning that only the trucks for which the warranty period has ended and the service contract has expired must be counted in the total number of trucks sold.

Read Also: CAIIB IT IMPORTANT CASE STUDIES

CAIIB NOV STUDY MATERIAL 2022

Our experts have compiled this amazing study material, especially according to your needs. Using our CAIIB study material for 2022 would be the best decision you could ever make. This study material would not only make all your concepts clear but will help you keep all the topics on your tips through our short and easy epdf notes.  We offer various services in our CAIIB study material 2022, which include:

  • Live and recorded video lectures.
  • Recorded video lectures can be downloaded and watched offline at your convenience.
  • All the subject lectures are available in a mixture of Hindi and English while for ABM and BFM, the videos are also available in the English language.
  • CAIIB mock tests 2022 are available for you to solve.
  • These mock tests 2022 also include memory recalled questions from previous years.
  • Case studies are also included in our CAIIB study material in Nov 2022.
  • Short and easy notes in the form of epdfs are complementary to our paid video lectures. These brief notes would help you revise all the topics in a short time.
  • These epdfs are available on our apps, for which the links are mentioned at the end of the article.

I hope you found this article helpful. 

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