Question

Revenues are recognized when ______, even when the cash is collected in a different accounting period than the obligation to the customer has been performed.

Answer 1

The two scenarios where Revenue is recognized are A) when the customer has paid cash (Cash Basis Accounting) and B) when services have been provided or goods delivered to the customer (Accrual Basis Accounting).

What is Cash Basis Accounting?

This system of accounting only takes cognizance of revenues and expenses when they have been paid or received.

What is Accrual Basis Accounting?

Under this system of accounting, business revenue is captured and recognized as soon as they are generated. That is, the money does not have to be earned before it is recognized if it is certain that it will be earned.

Please see the link below for more about Accrual Basis Accounting:

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Please see the link below for more about Cash Basis Accounting

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