Most companies that follow accrual basis accounting recognize revenue after they ________.
A) receive cash from the customer
B) deliver goods or perform services
C) pay cash for operating expenses
D) provide warranty service on a product

Question

Quizplus · Accepted Answer

Accrual basis accounting recognizes revenue when goods or services have been delivered, regardless of whether or not cash has been received. This means that revenue is recognized when the company has earned it, rather than when payment is received. Choice A is incorrect because receiving cash from the customer is not the determining factor for revenue recognition. Choice C is incorrect because paying cash for operating expenses is a separate transaction that does not affect revenue recognition. Choice D is incorrect because providing warranty service on a product is a post-sales activity that does not impact the initial revenue recognition.

Most Companies That Follow Accrual Basis Accounting Recognize Revenue After