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  • November 1999
  • Background Note
  • HBS Case Collection

Recognizing Revenues and Expenses: Realized and Earned

By: Robert S. Kaplan
  • Format:Print
  • | Pages:5
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Abstract

Describes a key concept in financial accounting: choosing an appropriate revenue recognition point. The accrual process requires revenue recognition and expense matching for reporting on the value creation process of companies. Describes the two key criteria for revenue recognition--realized and earned--and the conditions that must be met to satisfy these criteria. The use of the typical recognition point, when the product or service is delivered to the customer, is discussed as well as situations (e.g., the percentage of competition method) when revenue can be recognized before actual delivery. A rewritten version of an earlier note.

Keywords

Accounting Audits; Accrual Accounting; Cost Accounting; Budgets and Budgeting; Revenue; Profit; Cost Management; Value Creation; Competitive Strategy; Financial Statements; Accounting Industry

Citation

Kaplan, Robert S. "Recognizing Revenues and Expenses: Realized and Earned." Harvard Business School Background Note 100-050, November 1999.
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About The Author

Robert S. Kaplan

Accounting and Management
→More Publications

More from the Author

    • October 2023
    • Medical Care

    Health System Perspective on Cost for Delivering a Decision Aid for Prostate Cancer Using Time-Driven Activity-Based Costing

    By: David R. Ho, Robert S. Kaplan, Jonathan Bergman, David F. Penson, Benjamin Waterman, Kristin C. Williams, Jefersson Villatoro, Lorna Kwan and Christopher S. Saigal
    • September–October 2023
    • Journal of Breast Imaging

    Prospective Evaluation of the Cost of Performing Breast Imaging Examinations Using Time-Driven Activity-Based Costing Method: A Single Center Study

    By: Aamir Ali, Jordana Phillips, Damir Ljuboja, Syed S. Shehab, Etta D. Pisano, Robert S. Kaplan and Ammar Sarwar
    • August 2023
    • Faculty Research

    Vanderbilt: Transforming an Academic Health Care Delivery System, 2020

    By: Michael E. Porter, Robert S. Kaplan, Mary L. Witkowski and David N. Bernstein
More from the Author
  • Health System Perspective on Cost for Delivering a Decision Aid for Prostate Cancer Using Time-Driven Activity-Based Costing By: David R. Ho, Robert S. Kaplan, Jonathan Bergman, David F. Penson, Benjamin Waterman, Kristin C. Williams, Jefersson Villatoro, Lorna Kwan and Christopher S. Saigal
  • Prospective Evaluation of the Cost of Performing Breast Imaging Examinations Using Time-Driven Activity-Based Costing Method: A Single Center Study By: Aamir Ali, Jordana Phillips, Damir Ljuboja, Syed S. Shehab, Etta D. Pisano, Robert S. Kaplan and Ammar Sarwar
  • Vanderbilt: Transforming an Academic Health Care Delivery System, 2020 By: Michael E. Porter, Robert S. Kaplan, Mary L. Witkowski and David N. Bernstein
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