What do you understand by Revenue Recognition?

Question

Accepted Answer

Revenue recognition is the process of recording revenue in the financial statements when it is earned, regardless of when the payment is received.

Revenue recognition is a key accounting principle that determines when revenue should be recorded in the financial statements.
Revenue is typically recognized when it is earned, meaning when goods or services are delivered or performed.
The timing of revenue recognition can vary depending on the type of industry and the specific terms of the sale.
Revenue recognition is important for accurately reflecting a company's financial performance and ensuring compliance with accounting standards.
Examples include recognizing revenue from a software sale when the software is delivered, or recognizing revenue from a service contract as the services are performed.

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