3. Explaining the Principle of Revenue Recognition
One of your new clients, Sally Armstrong, is the owner of Hair Be Us, a small, successful chain of hair styling shops in the Los Angeles area. She knows little about accounting, but wants to learn more. She left you a voicemail last Thursday asking about the principle of Revenue Recognition. She does not understand the principle or the idea of when revenue is recognized or realized. Her message asked you what Revenue Recognition means, if there is a difference between recognition and realization, and what this means for her company.
In a short, formal business letter, explain the principle of Revenue Recognition and provide her a brief example that relates to her business. You must use plain, easy-to-understand language that clearly communicates the concept. Be sure to define terms as needed.
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