Select the statement below that correctly describes the revenue recognition principle.
A)Revenue is recognized when it is both earned and realized.
B)Assets will generally be recorded and carried at their historical cost.
C)Income (revenue)must be matched against expired costs incurred in earning the revenue.
D)Revenue will be recorded when payment has been received.

Question

Quizplus · Accepted Answer

The revenue recognition principle states that revenue should be recognized when it is both earned (i.e. goods or services have been provided) and realized (i.e. payment is certain or can be reasonably estimated). Option A correctly describes these conditions. Option B describes the historical cost principle, option C describes the matching principle, and option D describes cash basis accounting, where revenue is recognized when payment is received.

Select the Statement Below That Correctly Describes the Revenue Recognition