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:

should be recognized when expenses are paid

should be recognized when it is earned, regardless of when cash is received

should be recognized at the end of the accounting period, regardless of when it is earned

should be recognized only when cash is received from customers

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Verified step by step guidance

Understand the revenue recognition principle: It is a fundamental accounting concept that dictates when revenue should be recorded in the financial statements.

Recall that revenue is recognized when it is earned, meaning the company has delivered goods or services to the customer, regardless of when cash is received.

Eliminate incorrect options: Revenue is not recognized when expenses are paid, as this relates to the matching principle, not revenue recognition.

Eliminate the option stating revenue is recognized only when cash is received, as this describes cash basis accounting, not accrual basis accounting (which follows the revenue recognition principle).

Select the correct option: Revenue should be recognized when it is earned, regardless of when cash is received, as this aligns with the accrual basis of accounting and the revenue recognition principle.