All of the following conditions signal that revenue recognition may have been recorded too early except:
A) large and volatile amounts of uncollectible accounts receivable.
B) a decrease in the number of days accounts receivable are outstanding.
C) unusually large amounts of returned goods.
D) excessive warranty expenditures.

Question

Quizplus · Accepted Answer

A decrease in the number of days accounts receivable are outstanding implies that customers are paying their bills quickly, which would typically be a positive indicator for revenue recognition. The other three conditions suggest possible issues with revenue recognition, such as recognizing revenue before it is actually earned or recognizing revenue that will not ultimately be collected or sustained.

All of the Following Conditions Signal That Revenue Recognition May