Premature revenue recognition is the recognition of revenue before accounting standard requirements for recording revenue have been met. An example of this is:

Question

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The practice of "bill-and-hold" sales is a type of premature revenue recognition. This occurs when a company invoices a customer for goods or services but does not deliver them at the time of the sale. Instead, the company holds onto the goods until a later date. Accounting standards require that revenue should not be recognized until the customer takes possession of the goods, so recognizing the revenue before this point is premature. Options A, B, and D are not examples of premature revenue recognition.

Premature Revenue Recognition Is the Recognition of Revenue Before Accounting