Revenue generally should be recognized
A)at the end of production.
B)at the time of cash collection.
C)when realized.
D)when realized or realizable and earned.

Question

Quizplus · Accepted Answer

Revenue should be recognized when it is realized (when cash or claims to cash are received or receivable) or realizable (when goods or services have been exchanged or there is an intention to exchange goods or services), and earned (when the seller has performed their obligations and the buyer has received the benefits of the transaction). This is in accordance with the revenue recognition principle in GAAP. Recognizing revenue at the end of production (choice A) or at the time of cash collection (choice B) may not accurately reflect when the revenue has been earned and may not align with GAAP. Realizing revenue (choice C) is not sufficient, as revenue must also be earned and/or realizable in order to be recognized.

Revenue Generally Should Be Recognized