SAC 4 previously outlined tests that may have been useful in determining if it is probable that an inflow of future economic benefits that is capable of measurement has occurred.These tests included.
A) That cash has been received.
B) That an order has been placed or it is possible to reliably estimate the collectability of debts.
C) That all acts of performance necessary to establish a valid claim against the external party have been completed.
D) That cash has been received and that all acts of performance necessary to establish a valid claim against the external party have been completed.
E) None of the given answers.

Question

Quizplus · Accepted Answer

Both A and C are included in D, so D covers all bases. It is important to have received cash and have completed all necessary acts of performance to establish a valid claim against an external party before recognizing revenue. Option B does not cover all cases as it does not consider the collectability of debts, while option A is too narrow as it only considers cash and not the completion of acts of performance. Option E is not a valid answer as it does not provide any useful information.

SAC 4 Previously Outlined Tests That May Have Been Useful