Which of the following is not an example of the application of the revenue principle?
A) Recording the sale of merchandise on credit in sales revenue.
B) Recording rent received in advance as rent revenue.
C) Recording accrued interest revenue on a loan made to another party.
D) Recording the sale of merchandise for cash in sales revenue.

Question

Quizplus · Accepted Answer

The revenue principle requires that revenue is recognized when it is earned, regardless of when the cash is received. In option B, rent received in advance is not yet earned; it is a liability (unearned revenue) until the period it covers passes. Therefore, it does not follow the revenue recognition principle until the service period occurs.

Which of the Following Is Not an Example of the Application