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

According to the revenue recognition principle, when should revenue be recorded?

When it is earned and realizable, regardless of when cash is received

Only when cash is received from the customer

At the end of the fiscal year, regardless of when the sale occurred

When the company places an order with a supplier

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Verified step by step guidance

Understand the revenue recognition principle: This principle states that revenue should be recognized when it is earned and realizable, not necessarily when cash is received. This ensures that financial statements accurately reflect the company's performance during a specific period.

Analyze the options provided: Review each option carefully to determine which aligns with the revenue recognition principle. For example, recognizing revenue only when cash is received does not align with the principle, as revenue can be earned before cash is collected.

Focus on the concept of 'earned and realizable': Revenue is considered earned when the company has delivered goods or services to the customer, and realizable when payment is reasonably assured. This is the key criterion for recognizing revenue.

Eliminate incorrect options: For example, recognizing revenue at the end of the fiscal year regardless of when the sale occurred violates the principle, as it ignores the timing of earning the revenue. Similarly, placing an order with a supplier is unrelated to revenue recognition.

Select the correct answer: Based on the revenue recognition principle, revenue should be recorded when it is earned and realizable, regardless of when cash is received. This ensures compliance with accounting standards and accurate financial reporting.