Revenue Recognition

An accounting principle for recognizing revenue when it is earned.

What is Revenue Recognition?

Revenue recognition refers to the process of recording revenue only when a company has delivered goods or services.

Proper revenue recognition ensures accurate financial reporting.

Common revenue recognition methods include:

  • Accrual accounting – Recognizing revenue when earned, not when received
  • Subscription-based recognition – Spreading revenue over the contract period
  • Percentage of completion – Recognizing revenue based on project progress

    • Businesses following GAAP or IFRS standards must adhere to revenue recognition principles.

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