# Revenue Recognition

> Revenue recognition is the accounting principle that determines when and how revenue from customer contracts is recorded in financial statements, governed by standards like ASC 606.

- **URL**: https://dodopayments.com/glossary/revenue-recognition

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## What is Revenue Recognition?

Revenue recognition is an accounting principle that determines the specific conditions under which revenue is recognized as earned. It dictates that revenue should be recorded when a service is performed or a product is delivered, rather than when cash is received.

### Why It Matters

- It prevents companies from inflating their financial results by recording revenue prematurely.

- Consistent recognition practices ensure that financial statements are comparable over different periods.

- It is a core component of accrual accounting and is strictly governed by standards like ASC 606.

## Learn More

- [SaaS revenue recognition explained](https://dodopayments.com/blogs/saas-revenue-recognition)
- [How to identify SaaS revenue leakage](https://dodopayments.com/blogs/revenue-leakage-saas)
- [How to build predictable recurring revenue](https://dodopayments.com/blogs/build-predictable-revenue)