When is revenue recognized under accrual accounting?

A:

Under the accrual accounting method, revenue is recognized and reported when a product is shipped or a service is provided. If there are expenses incurred to provide a product or service, those expenses must be matched with the period in which the revenue was recognized.

What Is Accrual Accounting?

Accrual accounting refers to an accounting method used to gauge a company's performance by recognizing economic events and not necessarily cash transactions. Economic events include the provision of goods and services that might not be paid for immediately; for instance, a lawn mowing company mows a client's lawn but does not expect payment for some time, yet the event is recognized as soon as the service is completed.

Accrual accounting attempts to present a more accurate reflection of a company's current condition by anticipating future cash inflows or outflows. This is in stark contrast with the cash-basis method of accounting, where revenue is recorded only after payment is received.

Revenue Recognition Principles

Since revenue is recorded and reported only when services are rendered under accrual accounting, and not when cash is received, there are considerations for the uncertainty of payment occurring. This uncertainty is reflected in an allowance for doubtful accounts, which attempts to estimate the amount that customers fail to pay.

In cases where payment is received prior to services being provided, accrual accounting dictates that the payment be initially recorded as a liability. The company then recognizes the payment as revenue only after the good or service is provided.

See the article here:
When is revenue recognized under accrual accounting?