Revenue is recognized in most businesses
A)Upon completion of the sale or when services have been performed and the business obtains the right to collect the sales price.
B)When the customer's order is received.
C)Only if paid in cash.
D)When cash from a sale is received.
E)Only if the transaction creates an account receivable.

Question

Quizplus · Accepted Answer

Revenue should be recognized when the sale or services have been completed and the business has obtained the right to collect the sales price. This is in accordance with the accrual accounting principle, which requires revenue to be recognized when earned, irrespective of whether cash has been received or not. Choices B, C, D, and E are incorrect as they do not reflect the actual recognition criteria for revenue.

Revenue Is Recognized in Most Businesses