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what is the principle of revenue recognition

what is the principle of revenue recognition

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Answer #1

Revenue is recognized when a critical event has occurred, and the amount receivable is easily measurable to the company. The revenue recognition principle using accrual accounting requires that revenues are recognized when realized and earned–not when cash is received.

If there is doubt in regard to whether payment will be received from a customer, then the seller should recognize an allowance for doubtful accounts in the amount by which it is expected that the customer will renege on its payment. If there is substantial doubt that any payment will be received, then the company should not recognize any revenue until a payment is received.

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