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Is an accrual-basis or cash-basis recognition of revenue more relevant for evaluating the performance of a sales staff?

Revenue on an accrual-accounting basis must be both earned and realized (or realizable) before accountants recognize it in the income statement. Companies recognize revenue in cash-basis accounting only when they have received the cash. Is an accrual-basis or cash-basis recognition of revenue more relevant for evaluating the performance of a sales staff? Why?

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Question: Revenue on an accrual-accounting basis must be both earned and realized (or realizable) before accountants recognize it in the income statement. Companies recognize revenue in cash-basis accounting only when they have received the cash. Is an accrual-basis or cash-basis recognition of revenue more relevant for evaluating the performance of a sales staff? Why?

Answer: There are some timing issues also in the preparation of financial statements. The economic life of the business is divided in to artificial periods in accordance with time period assumption.
Many transitions affect more than one time period. For example revenue is received in one period while it is actually earned in next or future period.

GAAP include two important principles of accounting. They are Revenue recognition and matching ...

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This solution discusses why accrual-based accounting is more appropriate with reference to GAAP in 582 words.

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