In accrual-basis accounting, when are revenues recognized?

In accrual-basis accounting, revenues are recognized when goods are delivered or services are provided, regardless of when the cash is actually received. This principle is based on the revenue recognition concept, which stipulates that revenue should reflect the economic benefits that a company earns through its normal business activities. By recognizing revenue at the point of delivery or service completion, this method aligns revenues with the expenses incurred to generate those revenues, providing a more accurate picture of a company's financial performance within a given accounting period.

This approach contrasts with cash-basis accounting, where revenue is only recognized when cash is received. Therefore, while options that mention cash or timing aspects of the fiscal year may relate to different accounting methods, they do not accurately reflect the principle of revenue recognition under accrual accounting. Properly applying this accrual principle allows for a clearer understanding of a company’s operational effectiveness and the true financial position over time.