Revenue recognition is the process of identifying and recording revenue in the financial statements of a business. Under generally accepted accounting principles (GAAP), revenue is recognized when it is earned, rather than when it is received. This means that a company can record revenue on its financial statements when it has completed the obligations associated with a sale or provided the goods or services to the customer, even if the payment for that sale has not yet been received. Proper revenue recognition is important for ensuring the accuracy and integrity of a company's financial statements, and for providing investors and other stakeholders with a clear and accurate picture of the company's financial performance.
