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In December, a company signed a contract with a regular customer to sell products for $100,000 and received $20,000. In January, the company received a payment of $80,000 from this customer for products to be delivered in February. Revenue regarding this transaction is recognized:


Correct answer. There are two criteria that a company must meet in order to record revenue: (1) it is earned (delivery has occurred/services have been rendered) and (2) it is realizable (cash payment, or something that be readily converted into cash, has been received) or collectibility is reasonably assured. Revenue can be recorded because both criteria have been met.

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