Revenue is recognized when earned and payment is assured; expenses are recognized when incurred and the revenue associated with the expense is recognized.
Transactions that result in the recognition of revenue include sales assets, services rendered, and revenue from the use of company assets.
Companies can recognize revenue at point of sale if it is also the date of delivery or if the buyer takes immediate ownership of the goods.
Accrual accounting allows some revenue recognition methods that recognize revenue prior to delivery or sale of goods.
There are three methods that recognize revenue after delivery has taken place: the installment sales, cost recovery, and deposit methods.
Accrual accounting does not record revenues and expenses based on the exchange of cash, while the cash-basis method does.