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

Revenue in the income statement for the year ended December 31, 2021 equals the:

Total sales orders received during 2021, regardless of delivery or payment

Total amount of goods and services delivered to customers during 2021, regardless of when cash is received

Total cash collected from customers during 2021, regardless of when goods or services were delivered

Total amount of expenses incurred during 2021

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Verified step by step guidance

Understand the concept of revenue recognition: Revenue is recognized when goods or services are delivered to customers, not when cash is received or sales orders are placed. This aligns with the accrual basis of accounting.

Review the options provided in the problem: Analyze each option to determine which aligns with the revenue recognition principle. For example, 'Total sales orders received during 2021' does not meet the criteria because revenue is recognized upon delivery, not order placement.

Focus on the correct principle: Revenue is recognized based on the delivery of goods or services during the accounting period, regardless of when cash is received. This ensures that the income statement reflects the actual performance of the business during the period.

Eliminate incorrect options: For example, 'Total cash collected from customers during 2021' is incorrect because cash collection is related to the cash basis of accounting, not the accrual basis. Similarly, 'Total amount of expenses incurred during 2021' is irrelevant to revenue recognition.

Select the correct answer: The correct answer is 'Total amount of goods and services delivered to customers during 2021, regardless of when cash is received,' as it adheres to the accrual basis of accounting and the revenue recognition principle.