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

Companies recognize revenue only when:

Inventory is purchased.

Cash is received from customers.

Expenses are paid in full.

It is earned and realizable or realized.

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Verified step by step guidance

Understand the concept of revenue recognition: Revenue is recognized when it is earned and realizable or realized, meaning the company has performed its obligations under the contract and there is reasonable assurance of payment.

Clarify the term 'earned': Revenue is considered earned when the company has delivered goods or services to the customer as agreed upon in the contract.

Clarify the term 'realizable or realized': Revenue is realizable when payment is expected to be received, and it is realized when payment has actually been received in cash or equivalent.

Review the incorrect options: Inventory purchase, cash receipt, and expense payment are not directly tied to revenue recognition. These are separate transactions that do not determine when revenue is recognized.

Apply the correct principle: Revenue should only be recognized when both conditions (earned and realizable/realized) are met, ensuring compliance with accounting standards such as GAAP or IFRS.