Under accrual basis accounting, when is revenue recognized?

Under accrual basis accounting, revenue is recognized when it is earned, regardless of when cash is received. This principle ensures that financial statements reflect the actual economic activities of a business during a specific period. Revenue is considered earned when the goods or services have been delivered or performed, satisfying the requirements of a transaction, and an obligation to pay has been established. This approach provides a more accurate picture of a company's financial position and performance by matching revenues to the expenses incurred in generating those revenues within the same accounting period.

This framework is foundational to accrual accounting, illustrating the distinction between the timing of revenue recognition and the actual cash flow associated with those revenues.