Subject category:
Finance, Accounting and Control
Published by:
Harvard Business Publishing
Version: 10 November 1999
Revision date: 16-Jan-2020
Length: 5 pages
Data source: Published sources
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Abstract
Describes a key concept in financial accounting: choosing an appropriate revenue recognition point. The accrual process requires revenue recognition and expense matching for reporting on the value creation process of companies. Describes the two key criteria for revenue recognition - realized and earned - and the conditions that must be met to satisfy these criteria. The use of the typical recognition point, when the product or service is delivered to the customer, is discussed as well as situations (eg, the percentage of competition method) when revenue can be recognized before actual delivery. A rewritten version of an earlier note.
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Abstract
Describes a key concept in financial accounting: choosing an appropriate revenue recognition point. The accrual process requires revenue recognition and expense matching for reporting on the value creation process of companies. Describes the two key criteria for revenue recognition - realized and earned - and the conditions that must be met to satisfy these criteria. The use of the typical recognition point, when the product or service is delivered to the customer, is discussed as well as situations (eg, the percentage of competition method) when revenue can be recognized before actual delivery. A rewritten version of an earlier note.