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

Which of the following statements is true concerning revenue recognition for new product pricing strategies under U.S. GAAP?

Revenue is recognized at the time the product is manufactured.

Revenue is recognized when the company sets the price for the new product.

Revenue is recognized when control of the product transfers to the customer, regardless of when payment is received.

Revenue is recognized only when cash is collected from the customer.

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Verified step by step guidance

Understand the concept of revenue recognition under U.S. GAAP: Revenue is recognized when control of the product or service is transferred to the customer, not necessarily when cash is collected or the product is manufactured.

Review the principle of 'control transfer': Control typically transfers when the customer has the ability to direct the use of the product and obtain substantially all of its benefits.

Clarify the timing of revenue recognition: Under U.S. GAAP, revenue is recognized at the point when the performance obligation is satisfied, which is usually when the product is delivered or the service is performed.

Eliminate incorrect options: Revenue is not recognized at the time of manufacturing, nor when the company sets the price for the product. Additionally, revenue recognition does not depend solely on cash collection.

Conclude with the correct statement: Revenue is recognized when control of the product transfers to the customer, regardless of when payment is received, as this aligns with the core principle of revenue recognition under U.S. GAAP.