The revenue principle states that revenue should be recognized only when a(n):
A) Exchange transaction involving goods and services has occurred and a cash down payment has been received.
B) Exchange transaction involving goods or services has occurred and the earnings process is essentially completed.
C) Sale or service transaction has occurred.
D) Completed earnings process can be projected.

Question

Quizplus · Accepted Answer

The revenue principle states that revenue should be recognized when an exchange transaction involving goods or services has occurred, and the earnings process is essentially completed. This means that the revenue should only be recognized when the seller has fulfilled their obligations to the buyer, and the buyer has received the goods or services for which they are paying. Option A is incorrect because a cash down payment is not required for revenue recognition. Option C is too vague, as it does not account for the completion of the earnings process. Option D is incorrect because projections are not sufficient for recognition, as they are not the same as actual completed transactions.

The Revenue Principle States That Revenue Should Be Recognized Only