The revenue recognition principle dictates that revenue should be recognized in the accounting period

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The revenue recognition principle states that revenue should be recognized in the accounting period in which the performance obligation is satisfied, meaning when the goods or services are delivered to the customer and the customer obtains control and ownership of them. This is the most appropriate time to recognize revenue because it reflects when the company has fulfilled its obligations and earned the revenue. Revenue should not be recognized before or after it is earned, or based on when it is collected, as this could result in inaccurate financial statements.

The Revenue Recognition Principle Dictates That Revenue Should Be Recognized