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Revenue Recognition

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(Graziano 2005).” In this paper some of the challenges and issues concerning revenue recognition and the procedures set in place by various accounting organizations, including FASB will be discussed. Accountants have long debated when a sales transaction should be recorded as earned revenue. The general rule states that revenue must be recognized when earned or realized, and should be matched to the liability that was faced in earning the revenue in the period...
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The general rule states that revenue must be recognized when earned or realized, and should be matched to the liability that was faced in earning the revenue in the period. This is known as the matching principle. However the question that many CPAs ask is: when is it really earned? Is it earned when the sale contract is signed, the product is delivered to the customer or the payment of the product is received? Ronald Clark draws the following scenario to help illustrate this revenue recognition issue: "Capitol Motors is in its first year of operations and as of December 30 has total revenues of $5 million, projected net income of $200,000, and total assets of $40 million (Capitol’s year-end is December 31)...
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