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

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

An income statement prepared using GAAP will show revenue when it is:

recorded at the time of customer order

earned and realizable, regardless of when cash is received

approved by management

received in cash, regardless of when it is earned

Previous problemNext problem

Verified step by step guidance

Understand the concept of revenue recognition under GAAP (Generally Accepted Accounting Principles). Revenue is recognized when it is earned and realizable, meaning the company has delivered goods or services and there is reasonable assurance of payment.

Clarify the difference between earning revenue and receiving cash. Under GAAP, revenue is not recognized at the time of cash receipt unless it coincides with the earning process. For example, in accrual accounting, revenue can be recognized before cash is received.

Eliminate incorrect options: Revenue is not recorded at the time of customer order unless the goods or services have been delivered. Approval by management is not a criterion for revenue recognition under GAAP.

Focus on the correct principle: Revenue is recognized when it is earned (goods or services are delivered) and realizable (payment is reasonably assured). This principle ensures that financial statements accurately reflect the company's performance.

Apply this understanding to the problem: The correct answer aligns with the GAAP principle of recognizing revenue when it is earned and realizable, regardless of when cash is received.