Revenue recognition question

Suppose a company sells a product, prepares an invoice for the customer (debiting accounts receivable and crediting sales, and then sends the invoice to the customer. Suppose further that the company does not send
the product to the customer until payment is received. When does the company recogize revenue?
I maintain that if payment is reasonable assured, revenue is recognized at point of sale (when the invoice is generated) and that the delivery terms (the item is sent to the client after payment is received) does not even enter the equation. Is this correct? Thanks.
Sara
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snipped-for-privacy@hotmail.com wrote:

At point of sale, or when reasonably completed (in the case of services, just an FYI). Sale isn't by DEFAULT when the invoice is generated. The POS could be FOB destination, the point at which the customer essentially receives the goods (when title passes). However some products aren't completed all at once. For instance, a magazine subscription... you can only recognize revenue as that product is delivered (monthly subscription whose invoice was for $120/year, you recognize $10/mo in revenue... the remained is held in Unearned Revenue, a liability account with a misleading name :)
Don't automatically associate receipt of payment with revenue recognition. They don't go hand-in-hand. Receipt of payment would relieve a liability if it doesn't also coincide with transfer of title.
-Holly
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Holly:
Thanks for the response. Suppose this product is, for example, a small clock. Would revenue in this case be recognized at point of sale or when the clock is sent or some other time?? Thanks again.
Sara
Holly J. Sommer wrote:

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Wouldn't this depend on whether the business is on a cash or accrual basis?
wrote:

customer
send
recognized
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It's accrual basis.
Meyer1228 wrote:

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snipped-for-privacy@hotmail.com wrote:

Accrual basis, when title transfers. Cash basis, when cash is received :)
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