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 general, revenue is recognized when:

Expenses related to the revenue are paid.

It is earned and realizable, regardless of when cash is received.

Cash is received, regardless of when goods or services are delivered.

An order is placed by the customer.

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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 company has delivered goods or services and there is a reasonable expectation of payment.

Review the criteria for revenue recognition under the accrual basis of accounting: Revenue is recognized when the performance obligation is satisfied, not necessarily when cash is received.

Analyze the incorrect options: Expenses related to the revenue being paid is not a criterion for revenue recognition. Similarly, cash receipt or customer order placement does not determine revenue recognition under accrual accounting.

Focus on the correct principle: Revenue is recognized when it is earned (goods or services are delivered) and realizable (payment is reasonably assured).

Apply this understanding to real-world scenarios: For example, if a company delivers a product today but receives payment next month, the revenue is recognized today when the product is delivered, not when the cash is received.