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Rationalize the numerator and simplify. Assume all variables represent positive real numbers.
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Recognition
In accounting, recognition refers to the formal recording of an item in the financial statements, acknowledging its existence and the fact that it meets the criteria for financial reporting.
Revenue
Income that a business receives from its normal business activities, usually from the sale of goods and services to customers.
Deferral
A deferral occurs when cash related to a future revenue or expense has been initially recorded as a liability or an asset.
Unearned Revenue
Money received by a business for goods or services that have yet to be delivered or performed.
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