The use of the net method of recognizing revenue by an agent
A)is appropriate as long as both revenue and costs are included.
B)is the correct method in a principal-agent relationship.
C)could result in an overstatement of the agent's revenue.
D)could result in an understatement of the agent's revenue.

Question

Quizplus · Accepted Answer

In a principal-agent relationship, the agent should recognize revenue on a net basis, meaning they report only the commission or fee they earn, not the gross amount of sales. This accurately reflects the agent's role and avoids overstating revenue.

The Use of the Net Method of Recognizing Revenue by an Agent