A bakery shop makes a large sale for $1400 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The bakery shop follows GAAP and applies the revenue recognition principle. When is the $1400 considered to be recognized?
A) December 5.
B) December 10.
C) November 30.
D) December 1.

Question

Quizplus · Accepted Answer

Under the revenue recognition principle, revenue is recognized when it is earned and realizable, regardless of when the cash is received. In this case, the bakery earned the revenue on November 30 when the sale was made, so the revenue is recognized on that date.

A Bakery Shop Makes a Large Sale for $1400 on November