Final answer:
A large order from a customer should not be recorded as revenue until the goods or services are delivered and performance obligations are satisfied, according to the revenue recognition principle.
Step-by-step explanation:
No, receiving a large order should not be immediately treated as revenue and recorded on the books. Revenue recognition should occur when the service is provided or the goods are delivered.
When considering whether to record a transaction as revenue, a company must follow certain accounting principles. In particular, the revenue recognition principle states that revenue should only be recognized when it is earned and realizable. If your company has received a large order, this does not yet represent completed sales or delivered goods. The order signifies a commitment from the customer to purchase your goods or services. However, until those goods or services are actually provided to the customer and all obligations are fulfilled, the transaction should be recorded as a liability, typically as 'deferred revenue' or 'unearned revenue' on the company's balance sheet. Once the company delivers the goods or provides the service, and the performance obligation is satisfied, the revenue can then be recognized in the income statement. This approach ensures that revenue is matched with the expenses incurred to generate that revenue and provides an accurate financial picture of the period in which the transaction actually takes place.