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18.07.2022 - 10:13

A company should recognize revenue when: a) the revenue is earned. b) the contract is signed. c) the seller satisfies the performance obligation. d) the consideration is received.

Question:

A company should recognize revenue when:

a) the revenue is earned.

b) the contract is signed.

c) the seller satisfies the performance obligation.

d) the consideration is received.

Answers (0)

Deanna April 13, 2023 в 23:48

The correct answer is c) the seller satisfies the performance obligation. Revenue can only be recognized when the seller has fulfilled all obligations under the contract and the buyer has received the goods or services. This is known as the revenue recognition principle, which specifies that revenue should be recognized when earned and when it is realized or realizable, and when it is earned it should be matched with the corresponding expenses incurred to earn it. Signing a contract or receiving consideration does not necessarily mean that revenue can be recognized, as the seller may still have outstanding obligations to fulfill.

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