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Income occurs when assets increase or liabilities decrease.

Revenue and cash receipts are not the same thing even though they are often confused. This short video explains the two different kinds of revenue your business can have and when they get recorded as income. Note that receiving payment for the products or services you sold is not the defining action in this regard.

Understanding the revenue recognition principle is especially important for service businesses (e.g., people selling coaching, consulting, training and other professional services). It equally applies to those selling products and consumables for which advance payments are received