What principle states that revenues are recognized when earned?

The principle that states revenues are recognized when earned is the Revenue Recognition Principle. This principle is a core concept in accrual accounting, which dictates that revenue should be recorded in the accounting records when it is earned, regardless of when the cash is actually received. This means that if a business provides goods or services, it should recognize the revenue at the point where it has fulfilled its obligations to the customer, rather than waiting until payment is received. This ensures that financial statements accurately reflect the company's performance during a given period by matching revenues with the associated expenses incurred to generate those revenues.

The Revenue Recognition Principle helps in maintaining consistency and comparability in financial reporting, which is essential for investors and stakeholders who rely on financial statements to make informed decisions. Understanding this principle is crucial for accurate financial analysis and reporting.