What does the phrase, "revenue is recognized when earned" mean?
A)Revenue is recorded in the accounting records when the goods are received from a supplier, and reported on the income statement when sold to the customer.
B)Revenue is recorded in the accounting records and reported on the income statement when the cash is received from the customer.
C)Revenue is recorded in the accounting records when the goods are sold to a customer, and reported on the income statement when the cash payment is received from the customer.
D)Revenue is recorded in the accounting records and reported on the income statement when goods are sold and delivered to a customer.

Question

Quizplus · Accepted Answer

The phrase "revenue is recognized when earned" means that revenue should be recorded in the accounting records and reported on the income statement when goods are sold and delivered to a customer. This concept is known as the revenue recognition principle in accounting, which requires revenue to be recognized when it is earned, regardless of when cash is received from the customer. This ensures that financial statements accurately represent the performance of the company during a specific period, and helps to prevent fraudulent accounting practices.

What Does the Phrase, "Revenue Is Recognized When Earned" Mean