When is revenue recorded in accrual accounting?

In accrual accounting, revenue is recorded when it is earned, regardless of when cash is received. This principle is fundamental to accrual accounting and aligns with the revenue recognition principle, which dictates that revenue should be recognized in the accounting period in which it is earned, when the goods or services have been delivered, and the customer is likely to pay for them.

This concept allows businesses to match revenue with the expenses incurred to generate that revenue within the same accounting period, providing a more accurate picture of financial performance. For instance, if a company delivers a product to a customer in December but doesn't receive payment until January, the revenue from that sale will still be recorded in December under accrual accounting, reflecting the period in which the transaction took place.

Other choices do not align with the accrual accounting principles. Cash receipt is relevant in cash accounting, while sales being made does not ensure that performance obligations have been fulfilled. Year-end closing pertains to finalizing accounts for the year rather than the timing of revenue recognition.