The core revenue principle states that:
A) Companies recognize revenue when the earnings process is virtually complete and it is probable that payments will be received.
B) Companies recognize revenue when goods or services are transferred to customers for the amount the company expects to be entitled to receive in exchange for those goods or services.
C) Companies recognize revenue when goods or services are transferred to the customer and payments are received.
D) Companies recognize revenue when the goods or services are transferred to the customer in an arm's length transaction.

Question

Quizplus · Accepted Answer

Recognizing revenue when the earnings process is virtually complete and it is probably that payments will be received is incorrect because it includes the earnings process notion from the realization principle. Recognizing revenue when goods or services are transferred to the customer and payments are received is incorrect because it focuses on receipt of payment. Recognizing revenue when the goods or services are transferred to the customer in an arm's length transaction is incorrect because it focuses on arm's length transactions and doesn't consider the amount the company expects to be entitled to receive.

The Core Revenue Principle States That