Revenue equals cash received

Definition: Under accrual accounting (required by GAAP/IFRS), revenue is recognized when earned (performance obligations satisfied), regardless of when cash is…

Reality

Under accrual accounting (required by GAAP/IFRS), revenue is recognized when earned (performance obligations satisfied), regardless of when cash is received. Cash received may include advances (deferred revenue) or collections on prior sales.

Why It MattersUnderstanding why "revenue equals cash received" is a misconception helps avoid analytical errors and improper financial decision-making.
CategoryRevenue Recognition

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