Accounting Question

Question

In view of the difficulty in estimating future events, would you recommend that accountants wait until collections are made from customers before recording sales revenue? Should they wait until known accounts prove to be uncollectible before charging an expense account? Explain and provide examples.

Answer 1

There is Matching Principle in Accounting as per GAAP (Generally Accepted Accounting Principle), which states that we should match Expenses with Revenue earned irrespective of receiving money from the customer. Once the service is performed, the company is allowed to enter the transaction of sale as revenue earned.