The revenue recognition principle indicates that revenue is recognized when
I.The benefits can be measured reliably.
II.The sales transaction is initiated and completed.
III.It is probable the benefits will flow to the company.
IV.The date of sale, date of delivery, and billing have all occurred.

Question

Quizplus · Accepted Answer

According to the revenue recognition principle, revenue should be recognized when it is probable that economic benefits will flow to the company and when the benefits can be measured reliably. The completion of a sales transaction is also important, but it is not the only factor to consider. The timing of delivery and billing are relevant, but they do not determine when revenue should be recognized. Therefore, choice (C) is the best option as it includes the two fundamental criteria required for revenue recognition, which are (I) and (III).

The Revenue Recognition Principle Indicates That Revenue Is Recognized When