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Revenue Recognition and Expense Recognition definitions

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  • Revenue
    Value received from providing goods or services central to a company's main business activities.
  • Expense
    Value of goods or services consumed or received to help generate revenue during a period.
  • GAAP
    Set of standardized accounting rules in the U.S. guiding when and how financial transactions are recorded.
  • Revenue Recognition Principle
    Guideline requiring income to be recorded when goods or services are delivered, regardless of payment timing.
  • Matching Principle
    Rule requiring costs to be recorded in the same period as the revenues they help produce.
  • Accrual Accounting
    Method where transactions are recorded when earned or incurred, not necessarily when cash changes hands.
  • Cash Basis Accounting
    System where transactions are recorded only when cash is received or paid.
  • Accounts Receivable
    Amounts owed by customers for goods or services already delivered but not yet paid for.
  • Liability
    Obligation to pay for goods or services already received, often arising when payment is deferred.
  • Asset
    Resource owned or controlled by a company, such as supplies, that can provide future economic benefit.
  • Cash Inflow
    Money received by a business, typically from customers in exchange for goods or services.
  • Transaction
    Economic event involving the exchange of goods, services, or obligations between parties.
  • Period
    Specific span of time, such as a month or year, used for reporting financial results.
  • Benefit
    Advantage or value received from goods or services, determining when expenses should be recorded.
  • Supplies
    Consumable items used in operations, recognized as expenses when utilized during a reporting period.