How does GAAP recognize revenue

How is revenue recognised under GAAP?

The GAAP revenue recognition principle states that revenues can only be recognized when earned and realized, not when they are received. "Realizable" refers to goods or services that have been received but payments for them are expected later.

What are the criteria for revenue recognition? The following criteria must be met before revenue can be recognized: there must be persuasive evidence that an arrangement exists; delivery must have taken place or services rendered; the price paid by the seller to the buyer must be fixed, determinable; and collectability must be reasonable assured.

When can I recognize revenue in this way?

The principle states that revenues are only recognized once they are realized or are realizable. They are usually earned when goods or services are transferred, but cash receipts are not considered. Cash accounting, however, recognizes revenues when cash is received regardless of whether goods or services have been sold.

What is the revenue recognition concept in accounting?

Revenue recognition principles dictates that revenue should be recorded only when earned and not when cash is collected. A payment received in advance by a customer is recorded under the accrual accounting basis. This payment is not to be considered revenue.