Revenue Recognition Principle Meaning

The revenue recognition principle or just revenue principle tells businesses when they should record their earned revenue.

Revenue recognition principle meaning. The revenue recognition principle is an accounting principle that requires revenue to be recorded only when it is earned. The revenue recognition principle is a cornerstone of accrual accounting together with the matching principle they both determine the accounting period in which revenues and expenses are recognized. 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. Before exploring the concept of revenue recognition further through a few examples we.

Definition and explanation revenue recognition principle of accounting also known as realization concept guides us when to recognize revenue in accounting records. The blueprint breaks down the rrp. Revenue recognition is a generally accepted accounting principle gaap that stipulates how and when revenue is to be recognized.