Revenue Is Recognized When It Is Earned

When the conditions have been met if payment has not yet been received then the revenue should be recognized and an account receivable be should be recorded.

Revenue is recognized when it is earned. In some cases it is clear when these conditions have been met and the revenue earned should be recorded. The revenue recognition principle states that revenue should be recognized and recorded when it is realized or realizable and when it is earned. According to the principle revenues are recognized when they are realized or realizable and are earned usually when goods are transferred or services rendered no matter when cash is received. In other words companies shouldn t wait until revenue is actually collected to record it in their books.

Revenue should be recorded when the business has earned the revenue.