The revenue recognition principle
A) is not in conflict with the cash method of accounting
B) determines when revenue is credited to a revenue account
C) states that revenue is not recorded until the cash is received
D) controls all revenue reporting for the cash basis of accounting

Question

Quizplus · Accepted Answer

The revenue recognition principle determines when revenue is credited to a revenue account. It requires that revenue be recognized when it is realized or earned, regardless of when cash is received. This principle applies to both accrual and cash basis accounting. Option A is incorrect because even though the revenue recognition principle applies to accrual accounting, it is not incompatible with the cash method of accounting. Option C is incorrect because according to the revenue recognition principle, revenue is recognized once it has been earned, not when cash is received. Option D is incorrect because the revenue recognition principle applies to both accrual and cash basis accounting, not just the cash basis.

The Revenue Recognition Principle