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 means that revenue should be recognized at the point of sale, regardless of when the cash payment is received. Option A is incorrect because revenue is recognized when the goods are sold, not when received from a supplier. Option B is also incorrect because revenue is recognized when earned, not when the cash is received. Option C is partially correct, but revenue is recognized at the point of sale, not when the cash payment is received.

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