Revenue recognition means that:
A) revenue is not recorded until payment by the customer.
B) the recording of expenses is delayed until the related revenue has been earned.
C) revenue is recorded when earned.
D) revenue when a deposit is received.

Question

Quizplus · Accepted Answer

Revenue recognition means that revenue should be recorded when it is earned, regardless of when payment is received. This is in accordance with the accrual basis of accounting, which recognizes revenue and expenses when they are incurred, not necessarily when cash changes hands. Delaying the recognition of revenue until payment is received (option A) would result in an inaccurate picture of the company's financial performance. Option B describes the matching principle, which dictates that expenses should be recorded in the same period as the related revenue, but does not address revenue recognition itself. Option D is not a correct statement of revenue recognition principles.

Revenue Recognition Means That