In accounting, revenue recognition is governed by the principle of when revenue is earned and realized, rather
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In accounting, revenue recognition is governed by the principle of when revenue is earned and realized, rather than when cash is received. For revenue to be recognized, certain criteria must be met. The main criteria typically includes the transfer of ownership, risks, and rewards associated with the goods or services to the buyer. In this scenario, since ownership of the merchandise has not transferred to the customer, we generally cannot recognize the revenue at this point.
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