When the entity has substantially accomplished what it must do to be entitled to the benefits represented by the revenues, revenues are considered
A) earned.
B) realized.
C) recognized.
D) All of these answers are correct.

Question

Quizplus · Accepted Answer

According to the revenue recognition principle, revenues are considered earned when the entity has substantially accomplished what it must do to be entitled to the benefits represented by the revenues. Recognizing revenue means recording a transaction on the income statement, and earned revenues are recognized as increases in revenue and net income. Realized revenues refer to the actual receipt of cash or other assets from the customer, whereas recognized revenues include both realized and unrealized revenues. Therefore, the most appropriate answer is A, earned.

When the Entity Has Substantially Accomplished What It Must Do