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

Which of the following is a true statement about making promises to customers under the revenue recognition principle?

Revenue is recognized when the contract with the customer is signed, regardless of delivery.

Revenue is recognized when the promised goods or services are transferred to the customer.

Revenue is recognized when production of goods is completed, even if not delivered.

Revenue is recognized only when cash is received from the customer.

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Verified step by step guidance

Understand the revenue recognition principle: This principle states that revenue should be recognized when it is earned and realizable, meaning when the promised goods or services are delivered to the customer, not necessarily when cash is received or when a contract is signed.

Analyze the first option: 'Revenue is recognized when the contract with the customer is signed, regardless of delivery.' This is incorrect because signing a contract does not mean the revenue has been earned yet. Delivery of goods or services is required for revenue recognition.

Analyze the second option: 'Revenue is recognized when the promised goods or services are transferred to the customer.' This aligns with the revenue recognition principle, as revenue is recognized when the performance obligation is satisfied by delivering goods or services.

Analyze the third option: 'Revenue is recognized when production of goods is completed, even if not delivered.' This is incorrect because revenue is not recognized until the goods or services are transferred to the customer, regardless of production completion.

Analyze the fourth option: 'Revenue is recognized only when cash is received from the customer.' This is incorrect because revenue can be recognized before cash is received, as long as the goods or services have been delivered and the performance obligation is satisfied.