Under accrual accounting, revenues are recognized when
A)the firm has performed all, or most of, the services it expects to provide.
B)the firm has received cash, or some other asset such as a receivable, whose cash-equivalent value it can measure with reasonable precision.
C)the firm has significant uncertainty about the amount and timing of the cash inflows and outflows from the sales transaction.
D)both a and b must be present.
E)none of the above.

Question

Quizplus · Accepted Answer

Under accrual accounting, revenues are recognized when the firm has performed all or most of the services it expects to provide (A) and when it has received cash or some other asset such as a receivable, whose cash-equivalent value it can measure with reasonable precision (B). This is in line with the revenue recognition principle, which states that revenue is recognized when earned, regardless of when the cash is received.

Under Accrual Accounting, Revenues Are Recognized When