Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

3. Accrual Accounting Concepts

Revenue Recognition and Expense Recognition

Financial Accounting

3. Accrual Accounting Concepts

Revenue Recognition and Expense Recognition

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Multiple Choice

In which of the following situations would a merchandiser record revenue?

When inventory is purchased from a supplier

When payment is received in advance but goods have not yet been shipped

When the merchandiser places an order with the manufacturer

When goods are delivered to the customer and the sale is finalized

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Verified step by step guidance

Understand the concept of revenue recognition: Revenue is recognized when it is earned and realizable, meaning the goods or services have been delivered to the customer and the payment is either received or reasonably assured.

Analyze the situations provided: For each scenario, determine whether the criteria for revenue recognition are met. For example, purchasing inventory from a supplier does not involve delivering goods to a customer, so revenue is not recognized.

Evaluate the situation where payment is received in advance but goods have not yet been shipped: In this case, revenue is not recognized because the goods have not been delivered to the customer, even though payment has been received. This would be recorded as unearned revenue, a liability, until the goods are delivered.

Consider the situation where the merchandiser places an order with the manufacturer: This is a preparatory step and does not involve delivering goods to a customer or earning revenue, so no revenue is recorded.

Conclude that revenue is recorded when goods are delivered to the customer and the sale is finalized: This is the point at which the merchandiser has fulfilled their obligation to deliver goods, and the revenue recognition criteria are satisfied.