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

The revenue recognition principle states that revenue is recognized when:

expenses related to the revenue are paid

it is earned and realizable, regardless of when cash is received

an order is placed by a customer

cash is received from customers

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Verified step by step guidance

Understand the revenue recognition principle: This principle is a fundamental concept in financial accounting that dictates when revenue should be recognized in the financial statements. It ensures that revenue is recorded in the period it is earned, not necessarily when cash is received.

Clarify the key criteria for revenue recognition: Revenue is recognized when it is both earned (the company has performed the service or delivered the goods) and realizable (it is reasonably certain that payment will be received).

Eliminate incorrect options: Review the provided choices and eliminate those that do not align with the revenue recognition principle. For example, 'expenses related to the revenue are paid' and 'an order is placed by a customer' do not meet the criteria for revenue recognition.

Focus on the correct option: The correct answer is 'it is earned and realizable, regardless of when cash is received.' This aligns with the principle that revenue recognition is based on earning and realizability, not the timing of cash receipt.

Apply the principle in practice: In real-world scenarios, ensure that revenue is recorded in the appropriate accounting period based on the completion of performance obligations and the certainty of payment, as outlined by the revenue recognition principle.