Under accrual accounting, when is revenue recognized?

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Revenue is recognized under accrual accounting when it is earned and realizable, which typically occurs when collection is reasonably certain. This means that the earnings process is considered complete when goods or services have been delivered or performed, and there is a reasonable expectation that payment will be received, even if cash has not yet been received.

In this accounting method, the focus is on when the transaction occurs rather than when cash changes hands. Therefore, recognizing revenue when collection is reasonably certain accurately reflects the economic reality of the business transactions, aligning with the matching principle where revenues and expenses are matched appropriately in the period they are earned.

Other options suggest recognizing revenue based strictly on cash transactions or payments, which does not adhere to the principles of accrual accounting. In contrast to the correct answer, recognizing revenue when cash is deposited or when a customer pays in cash ignores the broader context of when the service or product has been delivered or earned. Recognizing revenue when expenses are paid also deviates from the concept of revenue recognition, as expenses are not directly tied to the recognition of revenues in the accrual framework.