Question

Explain why, in most cases, a seller recognizes revenue when it delivers its goods rather than when it produces the goods.

Answer 1

In most cases seller recognizes revenue when it delivers its goods rather than when it produces the goods because:

according to the principle of revenue recognition, revenues are recognized in the period earned (buyer and seller have entered into an agreement to transfer assets ) and if they are realized or realizable ( cash payment has been received or collection of payment is reasonably assured).

So, when the goods are produced there is no such agreement generally with customer and it is uncertain that the good will sold or revenue will realized.