Revenues Are Recognized When Even When The Cash Is Collected In A Different Accounting Period

Revenues are recognized when even when cash is collected.

Revenues are recognized when even when the cash is collected in a different accounting period. 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. The most important thing to realize here particularly for saas companies is that cash isn t revenue i explain the difference in more detail in this post but in general no matter when a customer s cash arrives in your bank account you don t count it as revenue until you have delivered the product or service that it paid for. The crucial difference between cash and revenue. Cash is collectedbills are paidservices are performedcustomers prepay for goods services.

The revenue recognition principle a feature of accrual accounting requires that revenues are recognized on the income statement in the period when realized and earned not necessarily when cash.