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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.
Revenue recognition principle tax. Revenue recognition is a generally accepted accounting principle gaap that stipulates how and when revenue is to be recognized. The revenue recognition principle using accrual accounting. 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. The blueprint breaks down the rrp.
In other words companies shouldn t wait until revenue is actually collected to record it in their books.
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