The basic revenue recognition criteria, under GAAP, are that revenue should not be recognized until:
A) Services have been delivered, and cash has been received
B) Services have been agreed upon, and a price has been agreed upon, even if the services have not yet been delivered
C) An earnings process has been completed, and the revenue is either realized or realizable
D) Cash has been received, and services have been agreed upon, even if not delivered

Question

Quizplus · Accepted Answer

According to GAAP, revenue should only be recognized when the earnings process is complete and the revenue is either realized or realizable. This means that the company must have provided the goods or services, and the payment must be reasonably assured. Choices A and D are incorrect because cash receipt is not a necessary condition for revenue recognition. Choice B is also incorrect because revenue should only be recognized when the service has been delivered, not just when it has been agreed upon.

The Basic Revenue Recognition Criteria, Under GAAP, Are That Revenue