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Chapter 17. Revenue Recognition and Inco... > Recognizing Revenue During the Cash ...

Recognizing Revenue During the Cash Collection Process

As mentioned before, there are certain criteria that must be met before revenue can be recognized at the point of sale. It was also mentioned that complications occur when you recognize revenue at the point of sale, and when those sales are made on credit. In some cases the complications due to credit sales are so great that the collection of the amounts due for those sales become highly uncertain. In that case, revenues should not be recognized at the point of sale.

This is the sort of situation that might call for the application of the concepts and methods for recognizing revenue during the cash collection process. There are two ways to do so: the installment method and the cost recovery method.


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