Which of the following correctly applies the revenue realization principle?
A) Recording revenue in December 2014 for products manufactured but not yet delivered to customers.
B) Recording cash received in advance from customers as revenue when the product is not yet shipped.
C)Not recording dividend revenue in 2014 until the cash is received in 2015.
D)Recording revenue in December 2014 for products sold but not yet paid for in full.

Question

Quizplus · Accepted Answer

The revenue realization principle states that revenue should be recognized when it is earned and realized or realizable. Option D correctly applies this principle as revenue is being recognized for products that have been sold even though payment has not been received in full. Option A violates the principle as revenue is being recognized before the products have been delivered. Option B violates the principle as cash received in advance should be recorded as a liability until the product is shipped and revenue can be recognized. Option C violates the principle as dividend revenue should be recognized when the company has the right to receive payment, regardless of when payment is actually received.

Which of the Following Correctly Applies the Revenue Realization Principle