Revenue Recognition Rule - Cash Basis

Posted by Ana Orwel on Tuesday, April 21, 2009

Cash basis is another allowed revenue recognition rule, where revenue is recognised not at the moment the sale was made, but at the moment the actual payment related to the sale was received.

The advantage of this method is that it allows avoiding cost of bad debt recognition if the customer fails to pay for the goods sold or services provided. Still the business suffers this loss, however it is not reflected in the accounting.

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