Generally accepted accounting principles (GAAP) states revenue cannot be recognized until it is realized or realizable and earned. This is considered to be the case when all four of the following criteria of met: Persuasive evidence of an arrangement exists; Delivery has occurred or services have been rendered; Seller's price to the buyer is fixed or determinable; and Collectability is reasonably assured. Think about a recent significant purchase you made ($500 or greater) and analyze the purchase from the perspective of the company selling you the goods or services. When is/was it appropriate for the company to recognize revenue? (e.g. - I recently purchased a new car, evidence was the contract I signed in April and made a $5,000 down payment, delivery did not occur until July, the price was fixed through the contract, and I paid of the purchase price and financed through a bank - so the car manufacturer received full payment. The car manufacturer can recognize revenue when the car was delivered, not in April when I signed the contract and paid the deposit)