Which of the following activities does not violate the revenue recognition principle?
A) Recording revenue in December 2013 for units manufactured but not yet sold to customers
B) Recording cash received in advance from customers as revenue when the product is not yet shipped
C) Not recording interest earned in 2013 until the cash is received in 2014
D) Recording cash received in advance from customers as a liability when the product is not yet shipped

Question

Quizplus · Accepted Answer

The revenue recognition principle requires that revenue is recognized when it is earned and realizable, regardless of when the cash is received. Option D correctly follows this principle by recording cash received in advance as a liability, indicating that the revenue has not yet been earned because the product has not been shipped.

Which of the Following Activities Does Not Violate the Revenue