When company should recognize its revenue is important issue in developing financial statements. In the Intermediate Accounting, Kieso states that “the revenue recognition principle provides that companies should consider or recognize its revenue when it is realized or realizable and when it is earned.” (Kieso, 933)According this, two conditions must be fulfill at the time when a company is allowed and must record revenue:

condition

(1) when the company receives payment;

(2) when the company has earned that payment.

The importance of this issue to the users of financial statements is tremendous. If the principle is not properly followed, all stakeholders of that company can be misled into believing a company is profitable whining actuality it might be losing money . This type of mistake cannot be consider as ordinarily.

Example

Suppose Jon Sale a machine on December 31 for $ 4,000 and it was not paid until 15th January and it was not delivered until 3 January.

According to the revenue recognisation principal Jon should not record the sale in December even though this transaction was initiated because it was not earned until January when the machine was delivered

According to my opinion , Enron associates did not have sufficient controls set in place to monitor or govern their decisions. Actually they have bent the principal to suit their needs and at the first site we could say that there was no mistake made and the
SEC gave permission for Enron to use Mark to Market accounting for natural gas contracts In Enron we could say that the Rise and fall, Fox defines mark to market accounting as the method that “takes all the trades and contracts extending out into the future and figures out what their values would be based on current market prices . This type of method is easy to calculate for stocks, but for the future value of a gas contract several factors went into determining the true value