Revenue Recognition Principle What Does It Mean

In accounting the terms sales and revenue can be and often are used interchangeably to mean the same thing.

Revenue recognition principle what does it mean. Revenue recognition principle requires that the revenue must be realized or realizable in order to recognize it in the accounting records. Revenue recognition is a generally accepted accounting principle gaap that stipulates how and when revenue is to be recognized. It means that revenues or income should be recognized when the services or products are provided to customers regardless of when the payment takes place. To summarize the above discussion we can say that the revenue is recognized when the entity is entitled to it i e earned provided that it is recoverable i e realized or realizable not at the time.

The revenue recognition principle or just revenue principle tells businesses when they should record their earned revenue. Revenue recognition is an accounting principle that outlines the specific conditions under which revenue sales revenue sales revenue is the income received by a company from its sales of goods or the provision of services.