The Revenue Recognition Principle is a fundamental accounting concept that dictates how and when revenue is accounted for within a business's financial records. According to this principle, revenue is recognized when a company has fulfilled its obligations or provided goods and services to the customer, and when the payment for those goods or services is reasonably assured. This means that revenue should not be recorded just when cash is received but when these conditions are satisfied.

For example, if a company delivers a product to a customer on credit, it should recognize revenue at the time of delivery rather than waiting for the payment to be made. Similarly, for subscription services, revenue may need to be recognized periodically over the subscription term instead of immediately upon receipt of payment. This principle ensures the proper matching of revenues and expenses in the same accounting period to provide a clear representation of the company's financial position.

Following the proper Revenue Recognition Principle is essential for compliance with financial reporting standards such as GAAP or IFRS and is closely related to terms like 'Accrual Accounting' and 'Matching Principle'.