Business Analysis with Microsoft® Excel, Second Edition

Summary

Under accrual-based accounting, the realization and the recognition of revenue are critical to determining a company's financial position at any given time. In this chapter, you have seen how different circumstances can alter this timing.

Normally, you will find it both necessary and expedient to recognize revenue at the point of sale, along with its associated costs and the profit that results. However, the critical event that produces the revenue is not always the sale itself, or a project that generates revenue extends over a very long period of time, or certain subsequent events make it difficult to determine the revenue amount as the sale occurs. In such cases, it can be necessary to alter the timing of the recognition.