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 one of the two main criteria in the revenue recognition principle?

Revenue is recognized when inventory is purchased.

Revenue is recognized when it is earned.

Revenue is recognized when expenses are paid.

Revenue is recognized when cash is received.

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Verified step by step guidance

Step 1: Understand the revenue recognition principle, which is a fundamental concept in financial accounting. It states that revenue should be recognized when it is earned and realizable, not necessarily when cash is received or expenses are paid.

Step 2: Analyze the options provided in the problem. The first option, 'Revenue is recognized when inventory is purchased,' is incorrect because revenue recognition is not tied to inventory purchases.

Step 3: Evaluate the second option, 'Revenue is recognized when it is earned.' This aligns with the revenue recognition principle, as revenue is recognized when the company has fulfilled its obligations and earned the revenue.

Step 4: Consider the third option, 'Revenue is recognized when expenses are paid.' This is incorrect because revenue recognition is independent of expense payments.

Step 5: Review the fourth option, 'Revenue is recognized when cash is received.' This is also incorrect because revenue recognition is based on earning the revenue, not the timing of cash receipt.