Revenue recognition is the accounting principle that determines when revenue is to be recorded in the financial statements. This principle ensures that income is recognized in the period it is earned, regardless of when cash is received, making it crucial for accurately reflecting a company's financial performance. Proper revenue recognition affects long-term contracts, measurement concepts, elements of financial statements, and retained earnings as it helps businesses align their reported revenues with actual economic activities.
congrats on reading the definition of revenue recognition. now let's actually learn it.