A purchase order received from a client would trigger a journal entry under the earnings-based revenue recognition approach, but not on the contract-based approach.

Question

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Under the earnings-based revenue recognition approach, revenue is recognized when the earnings process is complete, which typically occurs when goods or services are delivered or completed. Therefore, receiving a purchase order from a client would signify the beginning of the earnings process and trigger a journal entry. However, under the contract-based approach, revenue is recognized based on the completion of specific contractual obligations, which may not be triggered by the receipt of a purchase order.

A Purchase Order Received from a Client Would Trigger a Journal