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Midterm Essay - Michael M Bailey Intermediate Accounting I...

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Michael M. Bailey Intermediate Accounting I Midterm Essay Revenue Recognition Principle Chapter 2 presented a series of conceptual accounting principles that provide an adequate foundation for understanding financial accounting. Of these principles, the one that stood out to me was the revenue recognition principle. I always thought that companies arbitrarily used accrual based accounting to account for different types of transactions in the face of recognizing revenues. However, the revenue recognition principle has opened my eyes to the various methods that companies and organizations use when recording profits. The revenue recognition principle answers the important question of when a company should recognize revenue. First, any transaction needs to be realized before it is recognized. But what makes revenue realizable? Companies realize revenue when it exchanges products or assets for cash or claims to cash. Transactions can be made via the Internet, in the stores themselves, etc. but the way companies record these
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