Sunday, April 12, 2009

Revenue Recongnition Principle Defintion

What is the Revenue Recongnition Principle in Accounting?

It is one of the most important accounting principles along with the matching principle. It is used to determine the correct accounting period to record when revennues are earned and expenses paid. One important aspect of this principle is that revenues are recognized when  realized or realizable and that they are recongnizable when earned.

This is quite different than cost accounting. In cost accounting revenues incurred by a company are reccorded when cash is received no matter when the product or service is actually given to the customer.

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