The concept which states that revenue is recognized when goods are sold is

The concept which states that revenue is recognized when goods are sold is called the "realization concept". This concept is based on the principle that revenue should be recognized when a company has completed the earnings process, which typically happens when goods or services have been delivered to customers. In simpler terms, the realization concept suggests that revenue should only be recognized when a company has actually earned it by providing a product or service to a customer. This means that revenue cannot be recognized simply because an order has been received or because a product has been produced. For example, if a company sells a product to a customer on credit, revenue will be recognized at the point of sale, even if the customer has not yet paid for the product. This is because the company has completed the earnings process by delivering the product to the customer. Overall, the realization concept helps to ensure that a company's financial statements reflect the actual revenue it has earned and the expenses it has incurred in a given period.