Revenue Recognition
Revenue Recognition is a fundamental accounting principle that determines when and how a company records money earned from sales. Think of it as the rules for deciding exactly when a company can say "we've earned this money" and put it in their books. It's important because it ensures companies report their earnings accurately and at the right time. For example, if a company sells a one-year subscription service, they might need to spread that revenue across 12 months rather than counting it all at once. This topic became even more important after new rules (ASC 606 and IFRS 15) changed how companies handle their revenue recording.
Examples in Resumes
Implemented Revenue Recognition procedures for subscription-based services
Led team in updating Revenue Recognition policies to comply with ASC 606
Managed Revenue Recognition processes for multi-million dollar contracts
Typical job title: "Revenue Accountants"
Also try searching for:
Where to Find Revenue Accountants
Professional Associations
Online Communities
Job Boards
Example Interview Questions
Senior Level Questions
Q: How would you handle revenue recognition for a complex contract with multiple performance obligations?
Expected Answer: A senior candidate should explain how to break down a contract into separate parts, determine the right timing for recording revenue for each part, and mention the importance of documenting the process. They should also discuss how they would train their team on handling such situations.
Q: Tell me about a time you had to implement new revenue recognition standards at a company.
Expected Answer: Look for experience in managing change across departments, creating new procedures, and training staff. They should mention how they handled challenges and ensured compliance.
Mid Level Questions
Q: What are the main differences between cash basis and accrual accounting for revenue?
Expected Answer: Should be able to explain in simple terms that cash basis records revenue when money is received, while accrual records it when earned, regardless of payment timing. Should provide relevant examples.
Q: How do you determine the proper timing for recognizing revenue?
Expected Answer: Should discuss the basic principles: identifying contracts, performance obligations, determining transaction price, and recognizing revenue when obligations are met. Should be able to give practical examples.
Junior Level Questions
Q: What is the basic principle of revenue recognition?
Expected Answer: Should explain that revenue is recognized when goods or services are delivered to the customer, not necessarily when payment is received. Should be able to give a simple example.
Q: What documentation do you need to support revenue recognition?
Expected Answer: Should mention contracts, invoices, delivery confirmations, and any evidence that services were provided. Should understand the importance of maintaining proper documentation.
Experience Level Indicators
Junior (0-2 years)
- Basic understanding of accounting principles
- Recording simple revenue transactions
- Understanding of basic documentation requirements
- Knowledge of accounting software
Mid (2-5 years)
- Handling complex revenue scenarios
- Understanding of ASC 606 requirements
- Revenue analysis and reporting
- Process improvement implementation
Senior (5+ years)
- Policy development and implementation
- Team management and training
- Complex contract analysis
- Audit preparation and support
Red Flags to Watch For
- Lack of understanding of basic accounting principles
- No experience with modern accounting software
- Unable to explain revenue recognition timing
- No knowledge of current revenue recognition standards (ASC 606/IFRS 15)
