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 conditions will cause revenue to be recognized over time according to the revenue recognition principle?

The entity transfers control of the good or service at a single point in time.

The customer simultaneously receives and consumes the benefits provided by the entity's performance as the entity performs.

The entity has an unconditional right to receive payment before any work is performed.

Payment is received in advance, regardless of when the performance obligation is satisfied.

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Verified step by step guidance

Understand the revenue recognition principle: Revenue is recognized when the performance obligation is satisfied, meaning the entity has transferred control of the good or service to the customer.

Identify the key condition for recognizing revenue over time: Revenue is recognized over time if the customer simultaneously receives and consumes the benefits of the entity's performance as the entity performs.

Evaluate the options provided: The first option refers to recognizing revenue at a single point in time, which does not meet the criteria for over-time recognition. The second option aligns with the principle of over-time recognition as the customer receives and consumes benefits simultaneously.

Analyze the third option: An unconditional right to receive payment before work is performed does not necessarily indicate that revenue should be recognized over time. It may relate to upfront payments but does not satisfy the performance obligation criteria.

Consider the fourth option: Payment received in advance does not determine the timing of revenue recognition. Revenue is recognized based on the satisfaction of performance obligations, not the timing of payment.