Final answer:
Accrual accounting records revenue when services are performed, independent of cash receipt. This complies with the matching principle, aligning revenue with corresponding expenses. Accounting profit uses this revenue figure, deducting explicit costs, distinct from economic profit, which also considers implicit costs.
Step-by-step explanation:
Under accrual accounting, revenue is recorded when the services are performed, regardless of when the cash is received. This means that revenue is recognized when it is earned and measurable, not necessarily when the cash is actually received. This approach to revenue recognition is aligned with the matching principle of accounting, which aims to match revenues with the expenses incurred to generate them, ensuring that financial statements reflect the actual financial performance of a company during a given period.
It is important to distinguish between different types of profit when discussing revenues. Accounting profit is considered a cash concept and represents total revenue minus explicit costs. This is different from economic profit, which includes both explicit and implicit costs.
The growth in revenues, such as those collected by the U.S. government, which is expected to be nearly $6 trillion for fiscal year 2017, demonstrates the substantial nature of revenue for organizations and governments alike.