In order to recognize sales revenue, collection of cash from the buyer is not necessary; however, collection must be reasonably assured.

Question

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According to generally accepted accounting principles (GAAP), revenue recognition can occur even if cash has not been collected yet, as long as there is reasonable assurance that it will be collected. This is known as the realization principle. However, if collection is not reasonably assured, revenue should not be recognized until it is received.

In Order to Recognize Sales Revenue, Collection of Cash from the Buyer