The realization principle implies that revenue should be recognized only at the time of the sale.

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The realization principle is a fundamental concept in accounting that requires companies to recognize revenue in their financial statements when it is earned and realized or realizable. This means that revenue should be recognized at the time of the sale when the earnings process is complete, the risks and rewards of ownership have been transferred to the customer, and payment is reasonably assured. By doing so, companies can provide reliable and relevant information to stakeholders about the amounts, timing, and uncertainty of their revenues, which is critical for assessing profitability, cash flow, and overall financial performance.

The Realization Principle Implies That Revenue Should Be Recognized Only