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Revenue Recognition: Definition and Meaning
Definition
Revenue recognition is the accounting process of determining when and how much revenue should be recorded.
Why It Matters
Revenue recognition can be complex for businesses with long-term contracts, progress billing, deposits, subscriptions, bundled services, change orders, or variable consideration. The correct treatment depends on the applicable accounting framework, contract terms, and when performance obligations are satisfied.
For contractors, revenue-recognition discussions may be closely connected with job costs, work-in-progress schedules, billings, estimates, and project status.
Example
A company evaluates when it has satisfied its obligation to a customer before recording related revenue.
Related Terms
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