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 statements is correct regarding revenues?

Revenues are recognized when expenses are paid.

Revenues are recognized when they are earned, regardless of when cash is received.

Revenues are recognized only when cash is received from customers.

Revenues are recognized at the end of the fiscal year, regardless of when goods or services are delivered.

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Verified step by step guidance

Understand the concept of revenue recognition: Revenue is recognized when it is earned, meaning when goods or services have been provided to the customer, regardless of when cash is received.

Review the incorrect statement 'Revenues are recognized when expenses are paid': This is incorrect because revenue recognition is not tied to the payment of expenses; it is based on earning the revenue.

Analyze the incorrect statement 'Revenues are recognized only when cash is received from customers': This is incorrect because under accrual accounting, revenue is recognized when earned, not necessarily when cash is received.

Evaluate the incorrect statement 'Revenues are recognized at the end of the fiscal year, regardless of when goods or services are delivered': This is incorrect because revenue recognition depends on the delivery of goods or services, not the fiscal year-end.

Conclude with the correct statement: 'Revenues are recognized when they are earned, regardless of when cash is received.' This aligns with the accrual basis of accounting, which is the standard method used in financial accounting.