revenue recognition principle

Revenue recognition principle holds that companies should record revenue when earned but not when received.

The revenue recognition principle is a cornerstone of accrual accounting together with matching principle.

For government accounting purposes, the revenue recognition principle dictates that revenue is recorded in the period it is realized.

The revenue recognition principle is the basis of making adjusting entries that pertain to unearned and accrued revenues under accrual-basis accounting.

According to the revenue recognition principle, it is recorded as a liability until delivery is made, at which time it is converted into revenue.

Deferrals are the consequence of the revenue recognition principle which dictates that revenues be recognized in the period in which they occur, and the matching principle which dictates expenses to be recognized in the period in which they are incurred.