Revenue should be recorded when it has been earned, not when the related cash has been collected.

Question

Quizplus · Accepted Answer

This is because revenue recognition principle requires revenue to be recognized when it has been earned, which means when a company has completed the activities it promised to do for its customer. The cash collection does not determine when revenue is recognized. However, companies often record revenue and accounts receivable together, as accounts receivable represents the future cash collection from customers.

Revenue Should Be Recorded When It Has Been Earned, Not