Recognizing revenue early in the cash-to-cash cycle:
A)is timely but less reliable.
B)is reliable but not timely.
C)does not require warranty costs to be estimated
D)is not permitted by GAAP.

Question

Quizplus · Accepted Answer

Recognizing revenue early in the cash-to-cash cycle may be timely because it helps to improve the company's cash flow position. However, doing so may not be reliable because it may not accurately reflect the performance of the company over the long term. Furthermore, recognizing revenue too early in the cycle may result in the overstatement of revenue and the understatement of expenses, which could mislead investors and other stakeholders. Although there are some situations where early revenue recognition may be appropriate, it is generally not permitted by GAAP unless certain conditions are met.

Recognizing Revenue Early in the Cash-To-Cash Cycle