A company that ships product to its customers in January 20X2 but records them as revenue in December 20X1 has not violated the revenue principle because they were manufactured and ready for sale before the accounting year end.

Question

Quizplus · Accepted Answer

According to the revenue principle, revenue should be recognized in the accounting period in which it was earned, regardless of when payment is received or when the product is shipped. Therefore, recognizing revenue in December 20X1 for products shipped in January 20X2 would be a violation of the revenue principle.

A Company That Ships Product to Its Customers in January