Multiple Choice
What is the first step in the process for revenue recognition according to the five-step model under ASC 606?
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3. Accrual Accounting Concepts
Revenue Recognition and Expense Recognition
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Which of the following accounting terms is commonly used interchangeably with 'revenue'?
A
Expenses
B
Liabilities
C
Assets
D
Sales
Verified step by step guidance1
Step 1: Understand the term 'revenue' in financial accounting. Revenue refers to the income generated from normal business operations, typically from the sale of goods or services.
Step 2: Recognize that 'sales' is a specific type of revenue. It represents the income earned directly from selling goods or services, which is why 'sales' is often used interchangeably with 'revenue'.
Step 3: Differentiate 'revenue' from other accounting terms provided in the options: 'expenses' (costs incurred to generate revenue), 'liabilities' (obligations owed to others), and 'assets' (resources owned by the company). These terms are not synonymous with 'revenue'.
Step 4: Confirm that 'sales' aligns with the definition of 'revenue' because it directly contributes to the income of the business through its core operations.
Step 5: Conclude that the correct answer is 'sales', as it is the term most commonly used interchangeably with 'revenue' in financial accounting.
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