Accounting policies for revenue recognition define when and how a company can recognize its sales revenues. In other words, it is the set of rules a business must follow to record their sales income. Revenue recognition policy requires companies to track the milestones they achieve while selling products or services, and make sure they are properly recorded in their financial documents before they can be reported on their income statement. This ensures that all businesses remain compliant with the Generally Accepted Accounting Principles (GAAP) and have accurate records of their sales performance. Additionally, accounting policy for revenue recognition also helps businesses identify areas where improvements can be made in order to grow sales and increase profits.