Realisation Concept

According to this concept, revenue is considered as earned on the date when it is realised.
In other word, revenue realised (either by sale of goods or by rendering services) during an
accounting period should only be taken in the income statement (Profit and Loss Accunt).
Unearned/Unrealised revenue is treated as earned on some specific matters or transactions.
For example, when goods are sold to customers, they are legally liable to pay, i.e. as soon as the
property of goods passes from the seller to the buyer. In short, when an order is simply received
from a customer, it does not mean that the revenue is earned or realised. On the other hand,
when an advance payment is made by a customer, the same cannot be treated as revenue
realised or earned. In case of hire-purchase transactions, however, the title or ownership of the
goods is not transferred from the seller to the buyer till the last instalment is paid. As such, the
down payments and the instalment received or due should be treated as actual sale, i.e., revenue
earned.