Red Company created advertising copy for a client.Which of the following does not indicate that the transaction meets the SEC's four criteria for revenue recognition?
A)The company and the customer agree that the customer owes for the service.
B)Both parties understand the price.
C)The goods or services have been used to produce revenue.
D)There is a reasonable expectation that the customer will pay the bill.

Question

Quizplus · Accepted Answer

The SEC's four criteria for revenue recognition are as follows: (1) the company has completed its duties under a contract, (2) the company and customer have agreed to the terms of the contract, (3) the goods or services have been delivered or rendered, and (4) there is a reasonable expectation of payment. Option C does not directly indicate that revenue has been generated, but rather that goods or services have been used to produce revenue.

Red Company Created Advertising Copy for a Client