Revenue is not recognized under the realization principle unless the earnings process is complete or virtually complete and there is reasonable certainty about the expected collection of the asset received.

Question

Quizplus · Accepted Answer

This statement correctly reflects the realization principle of revenue recognition, which requires the earnings process to be complete or virtually complete and that there is reasonable assurance of receiving payment for the asset received. In other words, revenue cannot be recognized until the company has fulfilled its obligations under the contract or transaction and has received or expects to receive payment from the customer.

Revenue Is Not Recognized Under the Realization Principle Unless the Earnings