Revenue should be recognized
A) at the end of production.
B) at the time of cash collection.
C) when realized.
D) when the performance obligation is satisfied.

Question

Quizplus · Accepted Answer

Revenue should be recognized when the performance obligation is satisfied, which means the goods or services have been provided to the customer and the customer has the ability to use or receive the benefit of what they paid for. This is in accordance with the principles of the new revenue recognition standard, ASC 606.  The end of production (A) may not necessarily coincide with the satisfaction of the performance obligation, so it is not the best choice. Timing of cash collection (B) and realization (C) are not the determining factors in recognizing revenue under ASC 606.

Revenue Should Be Recognized