The revenue recognition principle states that revenues should be recognized
A)when cash is received.
B)when they are earned, if cash will be received within the year.
C)when they are earned.
D)within six months of receiving cash.

Question

Quizplus · Accepted Answer

The revenue recognition principle states that revenues should be recognized when they are earned, regardless of when the cash is received. This means that revenue can be recognized before, at the same time, or after cash is received. Option A is incorrect because cash receipt does not determine revenue recognition. Option B is incorrect as it is too restrictive as the timing of cash receipt should not be perceived as a key factor in revenue recognition. Option D is incorrect because there is no set time-frame for recognizing revenue after cash is received, as it solely depends on when the revenue is earned.

The Revenue Recognition Principle States That Revenues Should Be Recognized