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

Under the revenue recognition principle, when should a company recognize revenue from the sale of a car, such as Vinny's Celica, assuming a valid contract exists and ignoring issues of the statute of frauds?

When the car is delivered to the buyer and control is transferred.

When the buyer expresses interest in purchasing the car.

When payment is received, even if the car has not been delivered.

When the contract is signed, regardless of delivery or payment.

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Verified step by step guidance

Understand the revenue recognition principle: Revenue is recognized when it is earned and realizable, meaning the company has fulfilled its performance obligations and control of the goods or services has been transferred to the customer.

Identify the key event in the sale of a car: The delivery of the car and transfer of control to the buyer is the critical point where the company has fulfilled its performance obligation.

Evaluate the options provided: Consider each scenario in light of the revenue recognition principle. For example, expressing interest or signing a contract does not fulfill the performance obligation, and receiving payment without delivery does not transfer control.

Focus on the correct condition: Revenue should be recognized when the car is delivered to the buyer and control is transferred, as this satisfies the performance obligation under the principle.

Conclude the reasoning: The correct answer aligns with the principle that revenue is recognized when the company has completed its obligation and the buyer has control of the asset.